Funny or Maddening?
Markets have rebounded in the last couple of weeks on the renewed notion that the Fed will cut rates this year. This is due to the slew of data recently that wasn’t so great, after all, “bad news is good news.”
Here’s a short list –
Consumer Confidence lower
ISM Manufacturing lower
ISM Manufacturing Prices Paid higher
ISM New Orders lower (and below 50)
Nonfarm Productivity lower
Unit Labor Costs higher
Change in Nonfarm Payrolls lower
Unemployment Rate higher
Average Hourly Earnings lower
ISM Services lower (and below 50)
ISM Service Prices Paid higher
ISM Services Employment lower
ISM Services New Orders lower
Retail Sales lower
Moreover, the enthusiasm around reasons to buy far outweighs the propensity to sell at the moment. The six rate cuts being priced in since the fall of ’23 drove prices far greater than the discounting of prices when those expectations were proved to be completely wrong. (But nobody cares about stuff like when the market is up)
As a reminder, this behavior is typical during an asset bubble, especially in the “complacency” stage.
What’s funny or maddening or both is that “Supercore” inflation was the driver just a couple months back. Supercore is inflation minus food minus energy minus housing. It was created during the pandemic because housing went ballistic. And its a focal point for Powell.
Ticks up and down in Supercore were a big deal and markets rallied then tanked then rallied etc as Supercore oscillated.
But this morning, there is hardly a mention of the Supercore on the Terminal, which is notable because it is even HIGHER than before and the highest value since April ’23.
Shouldn’t that continue to mean “higher for longer”?
Housing is the difference between Core and Supercore, so that’s clearly a factor. Core has continued to tick down (other than the one blip in March), so nothing is different than prior months when Supercore mattered more. The divergence of the two is notable and while there is a lag in housing, you normally don’t see them moving away from one another. ???
Bubbles are created from mass delusion. So the finicky nature of deciding what matters on a day to day basis should not surprise us. It’s just maddening if you are a logical person.
