Welcome to my weekly editorial, where I assess the big-picture macro landscape, explore potential risks, and identify the next narrative for traders.

Last week, I kept getting pings, rings, and dings from traders eager to discuss whether inflation is poised to make a comeback following the fourth consecutive hot inflation report in the U.S. Admittedly, we’re trending around 3.5% inflation on an annualized basis, which doesn’t look great amidst a cutting cycle. Consequently, the market has started repricing the inflation outlook, with the near-term (2-year) outlook once again outpacing the 10-year inflation outlook in inflation swaps. This dynamic is reminiscent of the early innings of 2021.

Does this mean we’re on the cusp of a second wave? I’m not overly concerned. Money growth is nowhere near “COVIDesque” levels, which is a prerequisite for a significant inflation wave given the clear lead-lag relationship between money growth and inflation.

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Chart of the week: Money growth not strong enough to re-create a 2021/2022 scenario