Yesterday’s sell-off into the close was that more prescient once 8:30am rolled around today. Peak inflation had been discussed amongst the Street after the PCE data on May 27th dropped from the previous month. That was for April however, and today’s CPI for May showed that inflation has not peaked, and now there are worries that June may follow the same tune (multiple components rose).
Investors are aware, or at least they should be at this point. Inflation is here, and central banks around the globe are going to raise rates. The next two weeks are busy with cb meetings, and Australia last night “surprised” the markets by raising their rate 50bps (instead of the 40bps expected) to 0.85. With the ECB on Thursday (although July a likely start), the FOMC next Wednesday (50bps), and then the SNB/ BOE next Thursday, traders understandably are happy to move cautiously.
Just as one Hurricane season ended (Carolina), a new one is starting (NOAA), JP Morgan’s Jamie Dimon had a stark warning to investors this morning about what potentially lies in store for them. Speaking at a conference, he warned “brace yourself” for the potential economic “hurricane” that could be coming as the Fed needs to undo years of support.
The investment puzzle of 2022 remains complicated no doubt, but one of the main concerns has been the Fed fetish the markets have developed. With inflation soaring, the Fed is hiking aggressively and 50bps for June and July is widely expected. Their rate path trajectory after that remains a question though, and for a market that is trying to re-allocate for the future economy, not knowing the end time makes it difficult to price assets.
At this point, investors do not need any more reminding of the headwinds that the economy and markets are confronting. Today’s PPI reading, while inline with estimates on a monthly basis (+0.5%), still showed a y/y gain of 11% (down from 11.5% in March). The Fed remains committed to their 50bps approach with even Bullard backing that in statements last night. So that means markets continue to price in a higher rate environment, and a potential recession, and the fact that the Fed will also be reducing their balance sheet (making the Fed put gone for now).
May the fourth be with you, and May the fifth take it away. Powell’s comments regarding 75bps not in the mix for the June meeting sent markets rocketing higher yesterday, but after a night of reflection, and economic/ central bank data (China, US and the BOE), traders decided they did not like what they heard from Chairman Powell, and drove assets (ex-commodities) lower.
4973 A daily trading perspective… Casey Badach | Jared Lechner | Andrew Chader | Ryan Maguire | Alan Clymer US dealing direct: +1 212 803 7300 MARKET SNAPSHOT S&P: ▲ +0.21% Nasdaq: ▼ -0.01% UST 10-yr: 2.832% VIX: 31.60 EUR/USD: 1.0556 USD/JPY: 128.45 Gold: ▼ -0.81% WTI Crude: ▲ +0.31% Copper: ▲ +0.25% S&P Leaders: […]
4973 A daily trading perspective… Casey Badach | Jared Lechner | Andrew Chader | Ryan Maguire | Alan Clymer US dealing direct: +1 212 803 7300 MARKET SNAPSHOT S&P: ▲ +1.61% Nasdaq: ▲ +2.15% UST 10-yr: 2.94% VIX: 21.37 EUR/USD: 1.0787 USD/JPY: 128.92 Gold: ▼ -1.38% WTI Crude: ▼ -5.22% Copper: ▼ -1.70% S&P Leaders: […]
4973 A daily trading perspective… Casey Badach | Jared Lechner | Andrew Chader | Ryan Maguire | Alan Clymer US dealing direct: +1 212 803 7300 MARKET SNAPSHOT S&P: ▼ -1.69% Nasdaq: ▼ -2.18% UST 10-yr: 2.767% VIX: 24.37 EUR/USD: 1.0881 USD/JPY: 125.37 Gold: ▲ +0.63% WTI Crude: ▼ -3.46% Copper: ▼ -2.08% S&P Leaders: […]
4973 A daily trading perspective… Casey Badach | Jared Lechner | Andrew Chader | Ryan Maguire | Alan Clymer US dealing direct: +1 212 803 7300 MARKET SNAPSHOT S&P: ▲ +0.43% Nasdaq: ▲ +0.06% UST 10-yr: 2.65% VIX: 21.55 EUR/USD: 1.0879 USD/JPY: 123.98 Gold: ▲ +0.76% WTI Crude: ▼ -0.21% Copper: ▼ -0.81% S&P Leaders: […]