So last week, before the CPI data hit, we said the following:
Well you couldn’t have asked for a more interesting setup for Friday’s CPI print.
Things were already interesting enough with this being just the latest data point that will either confirm or cast doubt on the notion that the labor market is “lying” about the state of the U.S. economy.
As a reminder, this is always — always — about expectations for Fed balance sheet normalization. The data needs to be just cold enough to keep Yellen from getting too aggressive and just warm enough to keep the bottom from falling out of the reflation narrative.
Anything “too good” risks undercutting risk assets as it would suggest the Fed has room to move ahead with normalization and anything “too bad” casts doubt on claims that we’re not headed for a recession.
The headline print was expected to be +0.2% m/m. Whisper number was +0.1%.
As Bloomberg notes, “the past five CPI reports have shown less price pressure than expected and this week’s flight-to-quality gains, even an in- line result may spark a selloff.”
Or maybe not. Because remember: bad news is good news for risk as described above. And again, that’s what makes this so interesting. It’s coming amid a flight-to-safety which means it’s unclear if bad news will actually be good news this time around.
Sure enough, the data was lackluster and guess what happened next? Here’s a screengrab of our headline:
Well even though stocks got a lift after the CPI miss sent rate hike odds tumbling…
… Jefferies doesn’t think you’re excited enough about bad data.
Witness this hilarious bit from a new note:
That’s right! Jefferies wants to know why you’re not buying more into this “disinflation boom.”
We say again. “make bad news great again!”
#MBNGA
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