Inflation Stays High While Markets Ignore Warning Signs
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Inflation remains high and sticky, with core CPI at 3.8% annually and 0.4% monthly - consistent with 4.5-5% inflation rate. Second wave of inflation likely.
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Energy and shelter costs still increasing. Fed rate cuts could weaken USD and boost oil prices further.
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If Fed cuts rates as expected, could re-inflate housing bubble and boost shelter inflation. Financial conditions already loosened after Fed's dovish turn.
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Stock market ignoring warnings, still focused on AI theme. Bond market also mysteriously stable despite inflation warnings.
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Bond yields should be pricing higher inflation. If economy doesn't weaken soon, rates likely to spike. Bond market irrationality can't continue for long.