Last week started off with a rough Monday but then markets rejoiced when CPI numbers came out Tuesday. Even though CPI inflation numbers came in at 8.5%, slightly higher than expectations, the markets dug into the month-over-month increase of a little over 6% and saw the month-to-month inflationary momentum slowing. Some participants were led to believe that inflation has peaked. I don’t think this is true and the markets responded accordingly the next few days which led us to a worsening reprice.
I’ll be very surprised if inflation has peaked. However, it is more important to study the market’s reaction. I said a few weeks ago that things only have to go “from bad to less bad” for markets to move the way we want. And, as was apparent from Tuesday’s activity, the market is salivating for good news in order to spark another rally. We’re just not there yet.
This week, we have a lot of housing data along with hearing from some key Fed Presidents/members.
In The News
Monday
- Home Builder’s Index
- St. Louis Fed President Bullard speaks on Foreign Relations
Tuesday
- Building Permits
- Housing Starts
- Chicago Fed President Evans speaks
- Minneapolis Fed President Kashkari speaks
Wednesday
- Existing home sales
- San Francisco Fed President Daly speaks
- Chicago Fed President Evans speaks
- Atlanta Fed President Bostic speaks
- Fed Beige Book release
Thursday
- Initial and continuing jobless claims
- St. Louis Fed President Bullard speaks
- Fed Chair Jerome Powell speaks on the global economy to IMF
Remember, Fed President Bullard is the most Hawkish of the Fed presidents. I expect him to refer to last week’s CPI reports and argue that the Fed needs to make more dramatic rate hikes.
Chart Check (See Above)
The downtrend continues. But something that is interesting to notice is the daily range / size of the candlesticks is getting larger due to the increase in daily volatility as market participants react to any report or Fed Presidents’ words. Expect more volatility as we move forward through these unprecedented times.
I always said it is interesting how the Fed has increased rates through their words and not through their actions. Think about it. Rates have arguably doubled in the last year with only a 0.25% Fed rate hike. As it stands today, the expectation is that the Fed will do back-to-back half-point increases in May and in June. I highly doubt that this will happen. But them talking about it will undoubtedly increase rates up to the official announcement. One thing is certain, May’s decision and market reaction will play a big part in June’s action.
Bullard is most likely going to be hawkish tomorrow so it makes it tough to float rates anytime he speaks. I am trying to lock rates as soon as I can still because nothing has changed from January when I discussed how floating was dangerous. We get some inflationary data on next week Friday (4/29) so if you wanted to float, keep that in mind.
That’s it for this week.
Comments (0)Subscribe to CommentsComment