Inflation is good for stocks. Well, better for stocks than bonds.
Or more likely they just read the headline rather than reading the actual report.
*Investors Blog*
- Thread starter Warstud
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Or more likely they just read the headline rather than reading the actual report.
Yeah, inflation not going faster most likely was the good sign. Inflation IS still here though. Money is STILL sloshing around.
Market goes up............but shoe could drop in a couple hours, days, weeks...............I would repeat my mantra about inflation and the rate jacking being a crude tool, with consequences.
That said, yeah bond prices down, but not decided either way. IOW not enough for ME to back up the truck. The peaks here were decent buy points for all sorts of bonds, using the 10Y T as red haired middle child.
https://finance.yahoo.com/chart/^TN...iLCJ0aW1lVW5pdCI6bnVsbCwic2V0U3BhbiI6e319XX0-
The point is : the market has been going up in anticipation of rate cuts. And if the inflation data shows it's still rising the Fed will keep interest rates high
Maybe.
Only if you believe the government generated inflation numbers, which are artificially low.
You should be looking at the blue line here for more realistic numbers:
I won't argue the CPI data series is Fubar.
But shadowstats is worse. IN 1990 you got a phone bill from Ma Bell, and didn't likely own a cell phone, for example.
Everyone's inflation is different. Do you own your home or rent? Do you pay for your health insurance or does your employer.
Its a circular argument.
Its all up from here.
Janet will keep selling bills this month - draining the RRP will cover her bid. Long end shouldn't be affected.
2nd quarter federal revenues are at peak (tax season), so she won't need to sell much 2nd quarter. Estimates are only $200B, vs $700B this quarter. 3rd quarter before the election she will drain the TGA to juice the system before November 5th.
With 3.8% core CPI, fed funds @5.33% is not really restrictive.
So liquidity continues to rule.
Only fly in the ointment is if a bank or non bank implodes. Steve Munchin road to the rescue last weekend. We shall see what follows.
Not sure why I didn't see this until today, but it seems pretty clear now. All systems go for take-off until something blows up.
Janet will keep selling bills this month - draining the RRP will cover her bid. Long end shouldn't be affected.
2nd quarter federal revenues are at peak (tax season), so she won't need to sell much 2nd quarter. Estimates are only $200B, vs $700B this quarter. 3rd quarter before the election she will drain the TGA to juice the system before November 5th.
With 3.8% core CPI, fed funds @5.33% is not really restrictive.
So liquidity continues to rule.
Only fly in the ointment is if a bank or non bank implodes. Steve Munchin road to the rescue last weekend. We shall see what follows.
Not sure why I didn't see this until today, but it seems pretty clear now. All systems go for take-off until something blows up.
10 minutes ago I would have agreed, but I think this is wrong.
Market was afraid of falling inflation. Lower inflation = lower yields = higher bond prices. Market liquidity flees to the long bond.
Higher inflation ensures liquidity stays. No one is running to the long bond now. That is why market is up today.
Equities are the only game in town - near term.
Energy prices are already at -1.9% annual rate, driven mainly by Nat gas and fuel oil (warm winter).
Inflation and Stock Market Returns
Examining historical returns data during periods of high and low inflation can provide some clarity for investors. Numerous studies have looked at the effect of inflation on stock returns. Unfortunately, the studies have often produced conflicting results. Still, most researchers have found that higher inflation has generally correlated with lower equity valuations. Investopedia.com
https://www.investopedia.com/articles/investing/052913/inflations-impact-stock-returns.asp
I never heard that high inflation and high interest rates are good for the economy, maybe commodities not stocks .
I absolutely agree with this study. Look at stocks in the 70's - they were cut in half, not even counting inflation. Housing tripled. But that is long term, and looking at it in a vacuum.
Normally in high inflation you have recessions, low liquidity, and high yields on bonds. So what money there is moves to bonds.
We are awash in liquidity, and bonds yields are low - so bond prices are high. No money going there. The liquidity needs to go somewhere. Thats why I said stocks are better than bonds. At most until November 6th - assuming nothing blows up. I guess we will confirm it tomorrow - but it sure looked that way today.
What other possible explanation could you have for today?
What options do you have. T-bills. I have lots of those. Gold - I have a little of that. Bitcoin - not my thing, but it has quite a bid. Housing - I think that is over bought personally. Your all pushed back into equities.
I still think international could be a good bet - just a matter of where. Dollar is high currently. It won't be forever.
Where did I say anything about the economy?
Its about no one is buying bonds here in a rising inflation environment, and were awash in liquidity. Where do you think the liquidity will go?
So they rally hard on upside CPI surprise, then sell off 2 days after hot consumer spending and PPI.
So its clear I have no idea what this market is thinking. Its clear they don't either.
I am taking my T-bills and going home. I may even start buying the 10 year if it gets to 4.5%.
So its clear I have no idea what this market is thinking. Its clear they don't either.
I am taking my T-bills and going home. I may even start buying the 10 year if it gets to 4.5%.
I told you so.
Yes you did.
Yet I can’t find my box of surgical gloves
