Poof. Another Fed cut was priced out today in response to hot CPI data.
Word of the Day: Hot
Bond yields are up sharply and interest rate odds tumbled following a hot CPI report by the BLS today.
Rate Cut Odds
- Odds of a rate cut in June fell to 18.6 percent today from 57.4 percent yesterday. A week ago, rate cut odds were 62.3 percent.
- Looking ahead to December of 2024, another rate cut was priced out today. The weighted average expectation in December is now 4.93 percent up from 4.72 percent yesterday.
- A month ago, the weighted average expectation for December was 4.43 percent. That’s a difference of two full quarter-point cuts.
- We have gone from 6+ rate cuts projected in December of 2023 for December of 2024 to 1+ cuts now.
Bond Yields
- 30-Year: +0.084 to 4.583 Percent
- 10-Year: +0.143 to 4.506 Percent
- 2-year: +0.175 to 4.922 Percent
What Happened?
The CPI rose 0.4 percent in March. R
Rent is up another 0.4 percent in March with gasoline up 1.7 percent. Together, the pair was about half of the total rise.
Please note The CPI Rose Sharply in March Led by Shelter and Gasoline
Year-over-year the CPI rose by 3.5 percent.
Click on the above link for more details.
I warned about a steep increase in year-over-year inflation yesterday when I commented Expect Year-Over-Year Inflation to Increase
Last month, the reported year-over-year CPI increase was 3.2 percent.
Expect a year-over-year increase of 3.4 to 3.5 percent this month, but rent is a wild card.
Judging from the bond market and CME Fedwatch rate hike reactions, the hot CPI was not generally expected.
It’s no happenstance. Draining the O/N RRP injected new money and new reserves into the payment’s system. The money supply can never be properly managed by any attempt to control the cost of credit.
As democrat policies are targeting all facets of the energy sector, the nation’s economy continues to suffer. It’s simply anti-American to ignore the damage they’re intensionally doing.
Decidedly positive real interest rates were needed by Paul Volker to tame inflation. Jerome Powell keeps pussyfooting around with barely positive real interest rates (like Arthur Burns et al), and inflation continues like it did in the 60s and 70s.
The Fed Funds rate is at 5.5% compared to PCE around 2.8% and CPI at 3.5%. You want the Fed Funds rate to be more than 2% above annual inflation ? I would just keep it at 5.5% as annual inflation likely will remain within the range of 2.75% to 3.5%.
Prob good time to bring in more migrants –
INSIDE THE PENTAGON: Secretary of Defense Personnel, “Why Not Just Have An Open Border?” (rumble.com)
ZB 30yr off almost 2% today. Of course, no one buys USTs on leverage. 2 yr yield 4.9%. ES did quantum leap down then all day chop around in a new valence shell. Does what we used to call the “PPT” or its proxy frens pump tonight to save the nation from reality, or are we going closer to the nucleus? This week smells like a dump cometh. Bonds scorched. But there’s such a stench from politics and media that I don’t trust my nose as much anymore. And certainly not the politicians.
Inflation is between ten and twenty percent per year. Did anyone think hyper inflation would recede when the Fed set the free money price at 4%? USA is on the cusp of an inflationary boom. Every valuable skill or product price will enjoy higher nominal resets. Ash, trash, and garbage prices won’t reset. And the world will be a better place.
Keep on print’n sista, evwytin’ gonna be jus’ fine … Zimbabwe he’a we come…Don’ forge’ to sen’ m 60bln to Who’kraine btw … mere peanuts fo’ a goo’ cause ….
“Judging from the bond market and CME Fedwatch rate hike reactions, the hot CPI was not generally expected.”
I am expecting nothing but inflation with occasional false reprieves here and there over the next 10 years. It’s da boomers depleting the labor force yet spending like drunken sailors with all that SS cheddar. We all know there is no free lunch, today’s free money is tomorrow’s inflation.
Everyone needs to become intimately familiar with this chart
link to fred.stlouisfed.org
And learn the lessons of the past, 1970 to 1982 and plan accordingly.
Boy, I guess you don’t like Social Security. How’s about the people that paid into it for most of their lives? You are always hammering on the baby-boom generation and their Social Security benefits.
Paid into what? How many times do I need to say this, social security isn’t a personal 401k for you. There is no money set aside for you. It’s not a savings account either. Get that out of your head. Social security is a TAX just like income tax, property tax, sales tax. Tax money leave someone’s pocket and goes into someone else’s pocket, that’s it.
What people paid for a long time ago was a tax, that money went out of their paycheck and into someone else’s hands 40,30,20,10 years ago.
There is no “I paid for it” anymore than saying you are entitled to all airports in America because you once paid an airport tax or you are entitled to all toll free roads because you paid a toll once. It’s absurd that far too many people have that “I paid for it” mentality. People that make that statement make themselves look dumb by not understanding how taxation works.
I suggest you read the social security code, they state that they can revoke any and all social security at any time and they will likely do that when it goes bankrupt in about 10 years. If you “paid” for it, why is it going bankrupt? How does something you pay for go bankrupt? Explain that to me like I’m 5 and see if you can create a logical argument.
But even if you come up with an argument, explain to me how these people “paid for it” if the program keeps changing and keeps providing more and more generous benefits. How is it possible to pre-pay for all those extra changes to benefits from 30 years ago?
If you are on social security, you haven’t paid for it because I am providing your social security to the tune of $1000/month and some clowns here want the caps removed so I am forced to contribute $2000+/month for socialist leeches, no thanks.
Don’t be silly, they will never ever revoke it. If it goes ‘bankrupt’ they will just issue debt to cover it.
The reason is obvious. If you stop handing out that money then those seniors will just walk into Walmart or anywhere else and take what they need because no one, absolutely no one starves to death willingly. There aren’t millions of jail cells or guards to imprison them and even if there were, it costs more to house a prisoner in jail that just paying for social security so it’s a lose-lose proposition for tax payers.
Understand that Social Security and Welfare are essentially social bribes. They bribe is that we give you money and you stay out of trouble (don’t steal, don’t break in to steal, don’t kill or injure someone or yourself while trying to steal etc since all that including the health care to deal with gun shot victims or bury dead people costs more than the bribe).
The only way to cut off those payments is to simultaneously send out death squads to kill and bury all those people that’s just not happening.
And you know full well the BLS is under reporting this, possibly significantly, because they know full well it damages Biden.
BTW the geopolitics is what is playing with the oil prices. Saudis and Trump are in bed together with Kushner. They want Trump back in as president and are playing with oil supply to achieve their goals. This is the machine Biden is up against along with Putin and Xi. Oil prices went up in the months between the 2020 election and 2021 inauguration and border protection stopped enforcing the border and fox News had headlines showing Biden border crisis before inauguration day. Many Americans have short memories but I’m not one of them.
Here’s hoping Powell starts putting hikes and additional regulations on the table by summer in order to beat down commodity prices.
I just threw up in my mouth. The border numbers are clear as day. What has Biden done to help the oil industry in 4 years? It’s a global market. Your guy sucks. He might win but he’s a disaster of a President.
CNBC talking heads now saying 6 percent needed for inflation. Lol.
Time for a new Compound Inflation Report/Compound Currency Devaluation Report
If March 2024 CPI were calculated Biennially it would be 8.675%, stating that prices are 8.675% higher than in March, 2022. If March 2024 CPI were calculated triennially, it would be 17.91%, stating that prices are 17.91% higher than in March 2021. This Triennial CPI is sticky, and only slightly lower than last months 18.04% triennial CPI
Once again inflation is not simple inflation but is compound inflation. Triennial Compound CPI is approximately 12.00% greater than FED targeted 2% CPI goals for this same 3 year time period.
Moving Forward it would take just shy of 6 years of ZERO PERCENT CPI to arrive at what the FED’s targeted 2% CPI would have produced with March 2021 as the base month. I call this important number the “ZERO PERCENT CPI NEUTRAL AFFECT ADJUSTMENT INDICATOR” or ZPCpiNAAI for short.
4 year compound inflation is up, and now stands at 20.97%.
5 year compound inflation is essentially at 22.79 compared to last months 22.80% dollar devaluation reading.
6 year compound inflation now stands at 25.12% so essentially flat from last months 25.13% theft of purchasing power.
7 year compound inflation stands at 28.126%
8 year compound inflation stands at 31.20%
Compound inflation is the 9th wonder of the world. He who understands it, pays it … he who doesn’t … pays it.
Just the Facts.
Damage has been done
Sad for anyone on fixed income. Workers will demand higher wages to compensate so they’ll be ok eventually.
Indeed since excess mortality and disabilities in working age people have gone through the roof since the vaccine roll out … so workers who are still alive can demand more $$$
If you are middle management an eyeing that corner office… encourage the person sitting in that desk to get more boosters… offer to drive them to the clinic …
link to activistpost.com
Bravo Christoball. More duhmericans need to see/realize this. Keep spreading the truth
Golly gee whiz, they told me that compounding was only to magically make money …
How can I follow you? How can we protect ourselves against this tyranny?
“How can we protect ourselves against this tyranny?”
A wise man once said….Give a man some food, you feed him for a day. Teach a man to dumpster dive he eats for a lifetime.
On a serious note, this economy is a spiritual battleground disguised as intelligent consideration.
Just continue as you have been by being concerned for others as you are for yourself.
Continue being a giver rather than being a taker. Have thoughts, feelings and actions be a direct positive contribution to people and the planet.
Be a creator of something positive who provides something of substance in goods or deeds.
Do not be just a hustler seeking wealth at other peoples expense, but actually provide a good or service.
Avoid the love of money, and avoid people who have the love of money.
Direct your energies to positive loving people, and either avoid the rest or make them your ministry.
Have faith that the Creator of the Universe loves you.
Do you have a twitter account? I would love to follow you. Thanks.
I said it earlier this year as part of 2024 predictions that rates will likely need to be hiked. There is enough money floating around in the economy. The Fed needs to look at keeping the money supply the same or even remove money out of the supply in order to quell inflation.
Forget all this mumble jumble . . . Rates aren’t coming down in 2024 unless inflation drops signficantly or unless the BIDEN Whitehouse can pressure the FED . . . and if Oil goes over $100 a barrel . . . Rates will be going much higher . . .
And they can. There is more money available in the supply to keep hiking rates to 10%.
This is why the Biden Whitehouse is furious at Zelensky for bombing Russian oil infrastructure. It has caused oil prices to spike. I really don’t understand Biden and his decisions regarding Ukraine. It appears that he values his re-election over the right for Ukraine to defend itself.
As usual, I feel like this blog is dancing around the question that investors really want answered: how this will continued inflation affect equities? Perhaps not all, but a large portion of the ~25% jump in the S&P since October 2023 was predicated by the expectation of plentiful rate cuts in 2024.
Now that the predicted number of cuts is falling, will equities give back some or all of their massive recent gains? Or is the new narritive that the economy is so strong that we don’t need no stinkin’ rate cuts and stonks will continue to rise?
Where do you see the S&P at the end of 2024? Or right before the election? Post below.
I called for DIA 398 by April 1, this was back in Oct or Nov. Also called for zero to one rate cuts this year in Dec, I’ll go with zero now.
Just guesses that got lucky, mostly. SPX looks like it will probably fill a gap at 4980 sometime before the fall. That said, I expect good gains from there maybe 5400 election day (which feels soft based on today’s price) and 5800 EOY.
The bigger mystery to me is where are chips headed, SMH in a massive weekly channel back to the 86 low Nov 2022, and it’s in an even steeper channel the last six months or so. It really needs a bigger retracement to melt away “sudden crash risk.”
IWM has been battling a 2+ year base for a while, once it’s over about 213 it should really fly and assert leadership now that chips and megacap are perhaps showing rotation out of those sectors.
Thanks for chiming in. I sure hope you’re correct about that SPX pullback. I have some treasury bills and brokered CDs maturing in next few months that I would like to reinvest into equities. I’m kicking myself for allocating so much to fixed income to begin with. Listened to too many bears, I guess.
Yes. Listening to too many bears. Probably 80%-90% of the people who comment here. People “wanting” a market crash. People “wishing” for a depression. People “hoping” to see their fellow Americans lose their jobs. People who are too afraid to invest and prosper from American economic growth. People who don’t want to see others prosper, because they are not.
And it’s been the same people doing this for the last 3-4 years that I have been commenting here.
People telling me that oil is going to $40. That I’m going to lose 90% of my wealth. That I’m an idiot to think that the economy is growing because they know better. People who believe in every conspiracy theory they can find, including that all the economic numbers are fake.
And they have been wrong, year after year.
That’s why this site needs an IGNORE button. So you can choose to not see these never ending prophets of doom.
If the FED continues to pump asset prices and allows the wealth effect & Cantillon effect to add to inflation AND the federal government keeps spending $1T extra every 100 days then the ponzi will stay elevated up here around 5200
If the federal government criminals get forced to be responsible and stop spending, then it goes to 2191/Covid lows really quickly. It’s inflation and inflated asset prices or riots in the streets by the 80% getting crushed. Take your pick
The largest debtor the world has ever known cannot survive deflation; even if Uncle Sam slashes spending to “balanced”, it is far from obvious where the money to pay down the octogenarian’s debt (Biden, Yellen, McConnell, Pelosi, etc, etc, etc — both parties) would come from.
Inflation isn’t a choice; its a survival requirement. Anything but inflation is regime ending.
The value of stocks, measured with a devalued dollar, will be “higher” all else equal. The stock is worth the same amount, but the ruler being used to measure it is shrinking and creating the illusion the length is longer. The length is the same, the unit of measurement shrinks.
All else is not necessarily equal. P/E ratios are much higher than historical norms. If P/E ratios pull back to the historical average (around 15-16, versus 22), now that would be a big pullback in the watched indexes. If P/E enter a period below the average – to counterweight the period we just had above average – the resulting P/E compression could get nasty.
Inflation will be much higher, because Uncle Sam has no other choice (well, the regime could end but that is unlikely and a different matter). Regime survival requires high inflation for at least a couple decades.
What happens to P/E multiples is less clear. Do they stay elevated above 20? Do they revert to their long term average around 15-16? Do they experience a period below the long term average?
While T-Bills pay 5+% interest it’s hard to see a lot of people wanting to give up guaranteed returns for the roller coaster ride of the stock market. That goes especially for the big pension funds (think Calpers) who need to meet certain goals for their funds.
the debt issued by a massive debtor is never a safe bet, especially when you know that debtor intends to repay with devalued currency.
What interest rate would get you interested in Zimbabwe “soveriegn” debt? What interest rate would get you excited to lend to chronic currency printers in Latin Ameria, Greece, Italy, etc?
Turns out 5% t-bills with 7-8% inflation is not safe at all. But if Calpers wants to buy t-bills, let them do it.
The public unions (including but not just Calpers) have neglected and mistreated “we the people” for decades. All I have to say to the public servants is: what goes around, comes around.
I find it amusing that CalPERS does not invest in California muni debt. They know first hand that California’s government is full of sh!t and won’t ever pay.
In the next decade, I would imagine we will be digging up articles about US Treasuries being “certificates of confiscation” (see the same dog doo-doo in the 1970s).
Equities are less than 1/3 of the show. In terms of market cap, Real Estate > Bonds ~ Equity. Gold is much smaller. Inflation and interest rate changes affect all of them.
US Real Estate Market Cap ~$70T
(Residential ~45-50$T, Commercial ~$20-25T)
US Bond Market Cap ~$50T
US Stock Market Cap ~$50T
We are here
link to cdn.thefiscaltimes.com
Everything is going to zero.
You know, I hope you’re right. I’m underweight equities and a crash would force the Fed to cut rates, increasing the value of my fixed-income portfolio, which I could sell favorably and roll into beaten down stonks — a win-win. BUT doom & gloomer bears have been calling for a crash for years and missed out on huge gains in the meantime. I honestly don’t know how some glass-half-empty types remain so confident today given their track record.
You are underestimating the situation. We are facing complete collapse of civilization.
There will be no such thing as stock markets when this has played out.
You won’t like this — nobody does … but it is more or less what is going to happen – and why link to headsupster.com
Not surprised in the least…our leaders got away with letting asset inflation run hot while offshoring production keeping the cpi cool for decades turning the US into a nation of hustlers and speculators and the poor and middle class have to deal with cpi inflation on top of asset inflation now, fun fun!
How on earth could this not be expected.
There is nothing to suggest that inflation is going to flatten out or fall. Oil prices will continue to increase, transportation costs are rising due to international conflicts that are getting worse, tariffs are killing trade, and regulations are coming out of Washington faster than a bull out of a rodeo shoot. This kills labor productivity (just look at the idiotic $20 minimum wage for flipping burgers in California). On top of the sundae, the decline in M2 – or ODL or whatever you want to use – has flattened out.
So the stock of money is rising faster than productivity – ergo inflation.
How is the government going to service the $1.6 trillion debt for 2024? There is no way higher for longer can work. The terminal FED FUNDS rate is 0%.
Will Federal Government debt servicing be a talking point.
(along with inflation/illegal immigration)
during the 2024 November vote? Nah, nothing to see here.
Certainly, there will be no debate between Orange Julius and the Crypt Keeper.
public debt is being serviced at an avg around 3% with no need to roll to higher rates near-term.
Agree – there is no difference between the Republicrats and the Democrans when it comes to spending other peoples’ money
@sunriver “How is the government going to service the $1.6 trillion debt for 2024? There is no way higher for longer can work. The terminal FED FUNDS rate is 0%.”
Interest rates are not determined by what the crooks in Washington can afford with their glutton spending. Maybe you meant to say a trillion dollar “defense” budget and a public union headcount in the millions can’t work?
Ask Zimbabwe if having too much debt on the books causes the markets to lend at lower rates. It doesn’t work that way.
Markets will start pricing in credit risk into US Treasuries. Congress will be forced to slash spending and headcount as though they are GM/UAW in the 1970s.
Same garbage in, same garbage out.
Imagine running book for the mob and missing on covering bets like this …
I noticed that both Goldman and Amex lowered their rates on deposit accounts. Any idea as to why?
Greed
So they can take your money and buy T-bills now paying 5.4% and rake in the profits.
link to cnbc.com
When does Fed start artificially lowering rates so all our taxes aren’t going to interest on debt?
June as expected.
no cut in June, hoss
The rent is too damn high