Inflation

Powell Confirms Fed's Pivot To Rate Cuts. Doesn't Push Back Against Market Expectations.

Aug 23, 2024 3 min read paid

Fed Chair Jerome Powell was dovish in his Jackson Hole speech today. He didn't hedge. He didn't push back against market expectations of several rate cuts ahead as we anticipated he might. He wasn't more dovish than the market, but he didn't utter any hawkish views whatsoever to alter the market's dovish expectations for several rate cuts (chart). Powell unambiguously

Ed Yardeni
Eric Wallerstein

Are Grocery Stores Price Gouging?

Aug 21, 2024 3 min read paid

Today, Target CEO Brian Cornell said that there's no room for price gouging in a super competitive business like retail. He was responding to accusations by Vice President Kamala Harris that grocers are inflating their prices. As the Democratic candidate for President, she proposed the first ever ban on "corporate price-gouging" in the food and grocery industry. She also pledged last Friday to come after "

Ed Yardeni
Eric Wallerstein

2% Inflation: Are We There Yet?

Aug 14, 2024 2 min read paid

On long car rides, the kids in the back seat ask their parents, “Are we there yet?” Investors have been asking the same question about the Fed’s 2.0% inflation target. The answer is we aren’t there yet, but we're close. At his Jackson Hole speech at the end of next week, Fed Chair Jerome Powell is likely to confirm that. The question is whether he

Ed Yardeni
Eric Wallerstein

Immaculate Disinflation!

Aug 13, 2024 3 min read paid

This morning's July PPI was cooler than expected, rising just 0.1% m/m and 2.2% y/y. The markets responded by betting on a swifter Fed interest rate cutting cycle, sinking the 2-year Treasury yield to 3.956% and the 10-year yield to 3.856%. Stocks rallied in response to the data. The low inflation print supports our view that the US economy has left inflation

Ed Yardeni
Eric Wallerstein

Big Mac Confirms Weak Global Economy Is Facing More Deflation

Jul 29, 2024 3 min read paid

Consumers around the world have cut back on buying Big Macs at McDonald's. The company reported its first worldwide sales decline in 13 quarters today. The company's CEO said, "Consumer sentiment in most of our major markets remains low." Yet, the stock price rose nearly 4% today after the company said that its $5 meal deal is a big hit and will be extended.

Ed Yardeni
Eric Wallerstein

Lots of Moving Parts

Jul 25, 2024 3 min read paid

The stock market started to rotate out of LargeCaps and into SMidCaps after June's CPI was released on July 11 (chart). It showed lower-than-expected inflation, which increased the odds that the Fed would start cutting the federal funds rate (FFR) in September and triggered the rotation because small companies tend to depend more on floating-rate debt than large ones. Easier monetary policy would also reduce the likelihood of

Ed Yardeni
Eric Wallerstein

The Economic Week Ahead: July 22-26

Jul 21, 2024 3 min read paid

The week ahead is jampacked with key economic indicators, including the first read on Q2's real GDP and June's PCED inflation rate. We're expecting robust economic growth and further progress toward the Fed's 2.0% inflation target. The latest regional business survey might also confirm our forecast that the goods-producing sector is entering a rolling recovery. Here's our outlook for

Ed Yardeni
Eric Wallerstein

Panda In A China Shop

Jul 15, 2024 3 min read paid

China just loaned two young pandas to the San Diego Z00. In the past, such Panda Diplomacy suggested that relations between the US and China might be improving. It's hard to come to that conclusion currently since both US presidential candidates seem to agree that the US needs to slap more tariffs on Chinese goods. China remains very dependent on exports to boost its economy, especially since the

Ed Yardeni
Eric Wallerstein

Disinflating CPI Broadens Market Rally As Investors Rotate To SMidCaps

Jul 11, 2024 2 min read paid

This morning, we weren't surprised by June's lower-than-expected CPI report. It does increase the odds of a cut in the federal funds rate (FFR) in September. That supports our expectation for the stock market rally to continue and broaden out from the Magnificent-7. Indeed, the Russell 2000 rose more than 3% this morning, while the S&P 500 and Nasdaq declined as investors rotated into

Ed Yardeni
Eric Wallerstein

Giving Credit To The Consumer

Jul 8, 2024 2 min read paid

The strength of the US consumer has underpinned much of the current bull market in stocks. In recent months, rising real disposable income (DPI) has fueled consumer spending even as the excess saving accumulated during the pandemic was depleted. Debt service payments have remained below 10% of nominal DPI from Q1-2020 through Q4- 2023. That's relatively low because many households cleaned up their balance sheets following the Great

Ed Yardeni
Eric Wallerstein

The Economic Week Ahead: July 8-12

Jul 7, 2024 3 min read paid

Last month, lower-than-expected CPI and PPI inflation readings for May, along with rising unemployment claims for June, raised market expectations that the Fed will ease monetary policy sooner rather than later. The week ahead will be dominated by inflation data and jobless claims that are likely to confirm that the economy is in a disinflationary soft patch. That could boost both stock and bond prices. Consider the following: (1) CPI.

Ed Yardeni
Eric Wallerstein

Rate Cuts This Year Unlikely As Fed Gets Closer To 2.0% Target

Jun 26, 2024 3 min read paid

We still expect that the Fed's preferred core PCED inflation measure will fall to the Fed's 2.0% target by the end of this year (chart). It was already down to 2.8% y/y in April. May's number will be released on Friday, and should show further progress. We don't see the Fed cutting the federal funds rate (FFR) this year,

Ed Yardeni
Eric Wallerstein

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