Click here for the PDF: The Weekly Beacon February 16 2024

We will be giving some macro economic market updates on a weekly basis. No equity recommendations will be given in this commentary, and we encourage you to contact us if you have questions regarding any observations.

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This weeks issue: CPI, Inflation data, Interest rates, Jerome Powell, FED, Bill Ackman, Closed-end funds, Pershing Square Capital, Chinese markets, Chinese debt crisis, Chinese property values, Cathie Wood, Ark Investments, Nvidia stock, Lyft stock, Uber stock, Earnings report, Amazon stock, Amazon and China, Yield curve inversion, Sam Altman, OpenAI, Chip manufacturing.


Inflation data drop

On Tuesday morning the Bureau of Labor Statistics released January’s inflation data. The data showed prices moving higher than many expected.

For January prices rose 0.3%, a 3.1% annual rate down from December’s number but much higher than what was expected.

Core inflation, which strips out volatile items like energy and food, came in at 3.9%, flat versus December showing some stubbornness and stickiness in prices, something that we along with the FED have mentioned before. Forecasts had core inflation increasing by 3.7% for January.

Shelter made up most of the increase in inflation over the month, increasing 0.6% over the month and 6% over the last year, nearly double the actual consumer price index.

Food prices moved higher as well, up 0.4% on the month. Energy helped offset some of the increase, down 0.9% due largely to a 3.3% slide in gasoline prices.

January’s increase in the CPI could be problematic for the FED which is looking to take its foot off its monetary policy. The FED expects housing prices to decelerate by the end of the year and for housing prices to help alleviate the inflation rate. The FED mentioned in its last policy decision that it is still focused on a 2% inflation rate and will not be quick to slash rates in which inflation rates remain elevated.

Markets moved downward on this higher-than-expected inflation data on Tuesday as investors wake up to the realities of what the FED will do with policy throughout this year.

According to the CME FED Watch Tool, there is a 92% probability rates stay the same at the FED’s policy meeting in March, and a 61% probability that rates stay where they are at May’s decision. Just one month ago, there was an 81% probability of a March cut and a 99% probability that rates would be lower in May. Quite the pivot in just a few weeks.




Click here for the PDF: The Weekly Beacon February 16 2024