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The Macro Situation

ribs (noun)

• bony or partly cartilaginous rods that stiffen the walls of the body;

• a cut of meat; 

• what inflation sticks to.

                                             ― New Entry in the Updated Devil’s Dictionary

Inflation is sticking to the bones of the economy. 

• The Core Consumer Price Index for August was up slightly (0.3%) due to housing and services costs.

• The Core Producer Price Index was also up 0.3% and tends to lead consumer prices as wholesale costs are passed on to consumers.

Year over year from August? Things look ok.

• The core CPI was 3.2%, which is slightly high but in line with what was forecasted.

• The core PPI was 2.4% compared to 2.3% in July, a slight increase but under the targeted 2.5%.

Consumer sentiment has risen in view of the expected rate cut, increasing from 67.9 to 69. But just how big a cut is in the offing?

At the time of writing, the Fed Watch tool, which tracks the prices of various futures contracts related to interest rates (particularly the federal funds rate), estimates the chances of a rate cut in September are 50.0% for 25bps and 50.0% for 50bps.

The Chicago Fed made an adjustment to the ANFCI. The new reading places conditions at a -.56, which is a decline from the (newly adjusted) -.46 of last week. This level indicates that financial conditions are still loose.

Core Assets Update

Gold (2606.20) surged after a tame inflation reading. Meanwhile, the US dollar (101.11) remained relatively steady.

• Watch: GLD, GDX, NEM

Crude Oil (69.24) was down due to a sluggish Chinese economy and a subsequent cut in OPEC’s demand forecast.

• Watch: USO, VAL, XOM, RIG

The 10-year Treasury yield (3.657%) eased significantly after inflation data was released. The expectation of a rate cut announcement has investors optimistic.

• Watch: TLT, EDV, IEF

                                             -Todd Mei, PhD and Sebastian Purcell, Phd

 

AI Sentiment Report

The following sentiment scores use AI to track sectors as leading indicators. (Lesson 4 of The Art of The Bubble covers the selection of lead indicators for bubble trades). The scores are most indicative for the next day of trading (a Monday), but they appear to set the general tone for the next week.

 

-The Research Team:

                     Dom Viera, Samantha Russell, Nicole Zinuhova, Michelle Milan

 

 

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