Thoughts From The Divide: Pandora’s Box
“What is the appropriate inflation target?” While the Whitehouse may have successfully avoided putting its foot in its mouth on inflation this year (We hope
July 12, 2024
“What is the appropriate inflation target?” While the Whitehouse may have successfully avoided putting its foot in its mouth on inflation this year (We hope
Negative base effects imminently drop out of the data, meaning the risk is rising that goods prices more than offset flat to modestly falling services price inflation. This is a narrative breach for most analysts and portfolio managers, not to mention JP and his merry band of optimists. Looking to add volatility trades as the summer progresses.
• MoF Likely Intervened to Support Yen, BoJ Conducts Euro Rate Checks• Nikkei 225 Falls More Than 1,000 Points as High-Tech Shares Sold• OIS Points
We just sent you a piece outlining the possibility that we stand on the cusp of a significant regime change (MI2 Chart point: Nice or Nasty Revisited”. At its core, it outlined a scenario in which rate cuts led by lower inflation drive the dollar lower, triggering a massive growth/value rotation across all markets.
In this week’s CPI piece, we wrote that “the base effects become more acute next month, so we could be a month too early” in terms of our expectations for a bounce. Annoyingly, that appears to be the case, so we apologise. The good news is that the resulting market moves suggest we could be on the cusp of something significant.