In this week’s e-newsletter, we’re mosting likely to give you with a rising cost of living upgrade based upon several of recently’s vital information launches as well as likewise share some basic ideas on danger possessions and also liquidity.
Allow’s dive right in:
GMI Graph 1– United States PPI YoY% vs. United States CPI YoY%
was available in dramatically listed below agreement assumptions in February (4.6% vs. 5.4% anticipated) and also currently targets closer to 4% in the following one to 2 months.
GMI Graph 2– College of Michigan Typical 1-Year Rising Cost Of Living Assumptions vs. United States CPI YoY%
College of Michigan suggest the exact same.
GMI Chart 3 – NFIB Small Business Survey: % Reporting Higher Prices vs. US CPI YoY%
Last week saw the release of the latest data for February, where small businesses continue to report a rapid decrease in price pressures.
% of Small Businesses Reporting Higher Prices Vs. CPI YoY%
In addition, inventories are still way too high, hence inventory satisfaction levels continue to collapse.
GMI Chart 4 – NFIB Actual Compensation Changes Past 3-6 Months vs. NFIB Compensation Plans
Also, despite ongoing concerns over wages being “sticky,” small business compensation plans continue to deteriorate, and actual compensation changes just lag by around a quarter: wages have peaked.
Our own GMI model indicates the same: wages aren’t “sticky,” they’re just extremely lagging.
GMI Chart 5 – NY Fed Global Supply Chain Pressure Index vs. Global Citi Inflation Surprise Index
Lastly, global inflation surprises are about to turn negative over the next couple of months and we see few people mentioning this.
The GMI Big Picture
Despite all the inflationistas talking oil breakouts every time trades higher for two or three days, our call at GMI was that we would see $60 before the next turn higher, which has been our core view since May of last year at our annual GMI Round Table event.
Just this week, we saw a break, down from a near-perfect symmetrical triangle continuation pattern we had been watching, which targets a move exactly down to $60.
The bottom line is that inflation will continue to slow and that the decline should really start to accelerate from here – it’s all down to the base effect.
Our view has been – for quite some time – that this would be positive for risk assets.
Clearly, the next few weeks will be the real test. It’s pretty clear after what happened to Credit Suisse (NYSE:) this week, with their share price plunging over 30% intraday on Wednesday and their 5-year CDS exploding to 700+ bps, that potential contagion fears over a funding squeeze on EU banks and other big users of the markets are growing.
The important takeaway from all of this is that, while contagion risks are real and deflation risks are rising, the worse things get now, the more the Fed will do – bad news = good news – and more cowbell is on its way.
That’s it from us this week. See you all next week.
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