{"id":1450874,"date":"2024-01-16T12:20:00","date_gmt":"2024-01-16T17:20:00","guid":{"rendered":"https:\/\/bugaluu.com\/news\/?p=1450874"},"modified":"2024-01-16T12:20:00","modified_gmt":"2024-01-16T17:20:00","slug":"it-will-take-a-lot-to-talk-market-down-from-rate-cuts","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/it-will-take-a-lot-to-talk-market-down-from-rate-cuts\/1450874\/","title":{"rendered":"It Will Take A Lot To Talk Market Down From Rate-Cuts"},"content":{"rendered":"

It Will Take A Lot To Talk Market Down From Rate-Cuts<\/span><\/p>\n

\n

Authored by Simon White, Bloomberg macro strategist,<\/em><\/p>\n

Recent data has highlighted inflation is sticky, and retail sales this week could confirm the consumer is far from tapped-out.\u00a0But it will take more than that – perhaps a coordinated response from Federal Reserve speakers – to disabuse the market of the multiple interest rate cuts priced in for this year.<\/strong><\/p>\n

The market continues to gun for the Fed\u2019s cutting cycle to begin in March.<\/p>\n

Consumer prices came in higher-than-expected<\/strong>, yet this barely moved the dial on those expectations.<\/p>\n

Soft producer prices data on Friday was seen as a post hoc justification for dovish pricing. But even there, under the surface, are clear signs of inflation that is becoming entrenched.<\/strong><\/p>\n

PPI measures prices received for non-retail firms. But for wholesalers, who do not buy raw materials, this is not directly measurable. In this case the Bureau of Labor Statistics estimates the value-add, i.e. the gross margin, for such companies.<\/p>\n

The black line in the chart below shows the percentage of industries whose gross margin is rising on an annual basis<\/strong>. It reflects a reasonable correspondence with services CPI excluding rent. The gross margin measure is rising, which is consistent with CPI rising again.<\/p>\n

<\/a><\/p>\n

Profits, since the pandemic, have been the biggest contributor to corporate prices, rather than labor.<\/strong><\/p>\n

It\u2019s not a wage-price spiral that is the main worry in this cycle, but a\u00a0profit-price-wage spiral.<\/p>\n

We will also get an update on retail sales this week. <\/strong>They have been much better than anticipated given the Fed\u2019s aggressive rate-hiking cycle. Leading data suggests that momentum should continue well into this year.<\/strong><\/p>\n

<\/a><\/p>\n

In normal circumstances, that might mean a reappraisal by the market and a shift to less dovish pricing. But that has not been the case lately<\/strong>, with the economy – and even Fed-speak explicitly talking down a March cut – seemingly ignored.<\/p>\n

It will likely take a more coordinated response from the Fed if they want to take an early cut off the table.<\/p>\n

There are at least six Fed board members and bank presidents due to speak this week,<\/strong> so we will find out how fervent is the desire to push back against the market\u2019s current dovish outlook.<\/p>\n<\/div>\n

Tyler Durden<\/a><\/span>
\nTue, 01\/16\/2024 – 07:20<\/span><\/p>\n

\u200bRead More<\/a>\u00a0<\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

It Will Take A Lot To Talk Market Down From Rate-Cuts Authored by Simon White, Bloomberg macro strategist, Recent data has highlighted inflation is sticky,…<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1450874","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1450874","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1450874"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1450874\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1450874"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1450874"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1450874"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}