Good Thursday AM,
PPI at the core level came in below expectations. However, the market focuses on Headline PPI, which includes Food and Energy. Historically the market is not as concerned with the headline number. This is different because there is so much worry in the market over food and energy prices. That said, the reaction is somewhat muted, and the charts still look ok. It is too early to know how the market will react once they have had time to digest today’s numbers. There is still plenty of chatter that the peak inflation numbers are in.
The knee jerk reaction is always overblown now with cat calls for the Fed to raise 100bps at their next meeting in two weeks. I don’t like the idea as the economic pendulum is quickly changing and the bigger the Fed swings to tighten now, the more volatile markets will react when the next et of data shows inflation has receded as has economic growth. News out today shows bank reserves for loan losses are growing exponentially as credit card debt is now maxed out. Anyone have an idea what comes next? Auto and credit card defaults. Likely mortgage delinquencies, although with the amount of home equity, I doubt we will see many foreclosures. I expect rates to improve, just a little patience.
If you have time, go on vacation to Europe, its less expensive than vacationing in the US as the dollar is now worth more than the Euro.
Please remain safe and healthy, make today great!