Next Wednesday’s CPI report is going to be devastating to the markets. As of right now the Cleveland Nowcast has August’s m/m CPI at +.8%, and the Nowcast is generally only off by about a tenth of a percent.
Markets are going to freak the fuck out:
- Markets will reprice for higher rates
- Financial sector will sell off on concerns related to bank stability
- The Fed will likely reconsider hiking in at the Sept FOMC meeting, especially considering today’s strong jobs report
This will start the waterfall through the end of the year. This will simply be the gut punch that markets need to kill the irrational optimism. Then we’ll start a steady trickle of harsh hard data that will lead markets yet lower.
Bank failures? ✅️ Student loans restarting? ✅️ ATH credit card rates? ✅️ ATH credit card debt? ✅️ Recession in China? ✅️ Recession in Europe? ✅️ Excess Covid savings spent? ✅️ US manufacturing activity down seven months in a row? ✅️
See, what the Fed knows that all you don’t seem to know is that covid killed or retired a huge amount of workers, then QE and helicopter money juiced the economy causing a worker shortage. That worker shortage won’t ease until the Fed kills enough businesses that labor demand drops. They are not going to rush in to save the markets lest inflation spike (more than it already is). The recession isn’t an unfortunate side effect.
It is the cure.