Morning Commentary
On the one hand, it’s astonishing that the market didn’t slip further into the abyss yesterday. On the other hand, if all the major indices were down 2% or 3% , it would have simply matched the hysteria in the headlines as the nation struggles to breathe while in the death grip of runaway inflation.
Instead, the market stumbled out of the gate like the last patron at the bar singing “How dry I am (hiccup).” But then sobers up on the hopes, hunches and guesses that there simply is no way inflation can remain at this level, right?
Sure, that’s a logical assumption, but these days, I’d rather be the guy stumbling out of the bar than the egghead relying on an educated hunch. Meanwhile, it was another ocean of red in the markets.
Demand
“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” - Milton Friedman
We keep hearing about the supply side of the inflation crisis as the part that will take the longest to unwind, and therefore, keep the number elevated. Coupled with other components; including rents, the argument has been that sticky inflation is the problem. But demand won’t go away.
Rents Through the Roof
United States - CPI: Urban Consumer - Rent of primary residence continues to climb higher at a faster pace.
Moody’s
Beige & Blue Book
Lost in all the brouhaha from the Consumer Price Index (CPI) report, the Beige Book release shows more signs of strain and frustration. For example, five districts noted concerns over an increased risk of a recession.
C- Note
I was saying the Fed needed to go 100-basis points (bps) last time out, and now it looks like even the most secret dove will have to step up and do their job.
The step up is perfect for them to strike the next nail so deeply into the problem that it gives them the cover they secretly (and not so secretly) long for.
I think the market will applaud such a move and suspect members will hint to such a move before the next quiet period.
Portfolio Approach
There are no sector weighting changes this morning in our Hotline Model Portfolio.
Today’s Session
Earnings season for second quarter kicks off on a disappointing note. JPMorgan Chase (JPM) and Morgan Stanley (MS) reported lower-than-expected earnings this morning, as the effects of the current volatility in the markets more than offset higher net interest income.
Comments from JPMorgan CEO Jamie Dimon added pressure to futures, as he warned of negative consequences from inflation.
"But geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices are very likely to have negative consequences on the global economy sometime down the road."
Producer prices inflation printed 11.3% y/y in June, nearing record highs. Recent declines in commodity prices should help next month. However, input costs thru the end of second quarter were still a headwind for companies.
Following the mixed message from last Friday’s job report, this morning's initial claims soared to its highest level in 8 months. New claims increased to 244k vs. 235k consensus. The report showed a big jump in unadjusted continuing claims across all programs.
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3/28/2024 1:39 PM | Fruitful Quarter |
3/28/2024 9:50 AM | LISTEN TO THE MARKET |
3/27/2024 1:40 PM | Mostly Higher |
3/27/2024 9:32 AM | U-TURN? |
3/26/2024 1:08 PM | Everything Is Up |
3/26/2024 9:42 AM | TAPPED OUT (I HOPE YOU AT LEAST GOT A T-SHIRT) |
3/25/2024 1:33 PM | Not A Mutiny |
3/25/2024 9:35 AM | STAYING THE COURSE…BEYOND TECH |
3/22/2024 12:56 PM | Toll on Americans |
3/22/2024 9:38 AM | A TAD TIRED |
3/21/2024 1:55 PM | Building on Gains |
3/21/2024 9:30 AM | A COMFORTING FED |
3/20/2024 1:33 PM | Pivotal Moment |
3/20/2024 10:00 AM | HERE COMES THE FED |
3/19/2024 1:33 PM | Picking Up Steam |
3/19/2024 9:35 AM | RUMBLINGS IN THE BOND MARKET |
3/18/2024 1:48 PM | Mag 7 is Back |
3/18/2024 9:39 AM | THE PARTY IN SAN JOSE WILL BE LIT |
3/15/2024 1:38 PM | Realtors Settle |
3/15/2024 9:33 AM | AN UNEASY PAUSE |
3/14/2024 1:43 PM | Sticky Inflation |
3/14/2024 9:48 AM | GOING TO A GO-GO |
3/13/2024 2:16 PM | Taking a Breather |
3/13/2024 9:51 AM | ALL SO EPIC |
3/12/2024 1:42 PM | Marching Higher |
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