Another week, another Wednesday, where we share our thoughts on the 5 most important topics in markets and macro. Read along! 

This week have chosen the following 5 things that we think are crucial in understanding the current picture:

1. Inflation – Will anyone talk about inflation in 6 months?
2. FOMC Meeting Minutes – how does the Fed address the current situation? 
3. Debt Ceiling – anything to look out for?
4. Energy – a buy or?
5. Japan, BoJ and the flight back home

Inflation – Will anyone talk about inflation in 6 months?

Today the most important and market-impactful number throughout 2022 was released. But will anyone talk about it in 6 months? We don’t think so. Almost every indicator that we can find screams disinflation, and we find it very unlikely that inflation will suddenly re-accelerate. (For more on where inflation is heading in our opinion, have a look at 10 forward-looking inflation indicators in this article)

Today’s report is right as we projected it to be. Headline CPI comes in at 0.1%, while core CPI remains at 0.4% for the 4th consecutive month. Seems like the sticky part of CPI is a bit more sticky than one would expect (which we touched upon earlier today in this piece). 

Nevertheless, the report is apparently still a compass for markets, telling them whether to head north or south – don’t expect the number to have the same value in a couple of months. Markets are liking the deviation of 0.15 percentage points, sending the 10-year yield down by approx. 10 bps and QQQ up with 1% right after release. A good day to be long tech and bonds for now. 

Chart 1: CPI Decomposed