Market Musings 2/12/2025
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
More #Tariffs and hotter #Inflation, but do investors care?
January #Inflation came in hot…
Overall CPI inflation was up +0.5% M/M in January－well above forecasts for +0.3% and further accelerating from December’s hot +0.4% reading. The spike was driven by housing, gas and food. On an annual basis, overall inflation was up +3.0%.
Meanwhile, core inflation (excluding volatile items like food and energy) was also up 0.4% M/M－also topping expectations and also accelerating from December.
As we’ve mentioned previously, the Fed typically prefers to focus on the PCE index to gauge #Inflation rather than the CPI or the PPI which comes out tomorrow. However, while there’s some differences in their make ups, all three are fairly correlated and a decent benchmark for actual inflation trends.
While just a single month of data, the hotter January data adds to a string of stickier months that had the Fed pause its #RateCuts in the last meeting.
Bond yields rose today on expectations that rates will remain higher for longer while #RateCuts expectations got pushed out further－now just one cut expected this year. Markets initially sank after the CPI release, but mostly recovered by the end of the day.
It was a similar story earlier in the week after reports of new steel and aluminum #Tariffs. Markets continue to remain very optimistic and seem to be looking for reasons to rally.
We remain cautiously optimistic for a hopefully more favorable business environment on tap. However, we continue to monitor a lot of headwind pressure building up from increasing #Tariffs, sticky #Inflation, true #LaborMarkets strength and just general macro uncertainty.
We’ll be getting more #Inflation data tomorrow from the PPI. Hopefully, it’ll be more in-line and cast the hot January CPI data as just an outlier.
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The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.
Original Photo by Pixabay.