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An S&P That ‘Looks Through’ Inflation Vol Is 7% Higher: JPMorgan
A fixture of various "new era," economic-regime-shift commentary is the idea that macro volatility h
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I appreciate seeing this- thanks. Yes if the markets thought you could have continuous inflation shocks- stocks and bonds would be significantly lower in price. I have some friends who are consultants/free lance and they are telling me that on the ground- opportunities are slowing down right now. This is something that has happened in the last 2-3 weeks so it is not reflected in the numbers. And it is only relevant for the NY Metro. Still, it is reasonable to assume that growth and inflation have seen inflection points. The real question is the speed of adjustment and durability of it. The real surprise would be inflation significantly slowing after this summer with a Fed/other central bank pause. If that happened I would expect less cyclical components of the stock market plus long duration bonds to take off. Lets see if that is correct. It is only a guess.
My personal opinion is that “wishful thinking” is becoming prevalent. Inventory surpluses, normalization of supply chains, victory by Ukraine, conquest of covid, ignoring climate change, an absence of political instability, ignoring housing insecurity, etc. will conqueror inflation. Right???? There are many things that have to “go right” for inflation to decline significantly. Inventory surpluses are temporary, supply chain may never normalize, the war might go on for a decade, pandemic diseases might become more frequent, droughts/hurricanes/etc. can ruin ports, crops, homes, etc. and homelessness will probably increase.
Focusing in on one of your points: NOAA predicts an “above average” Atlantic hurricane season this year, with an expected 3-6 major storms. I wonder what that will do to gasoline prices? The bellweather gas station down the street now has regular at $6.79/gal. By the way, the last six Atlantic hurricane seasons have been “above average.”
Clearly there are some variations here. I’m in MO and gas across the street from my house is 4.29 for reg (lowest gas tax in US, btw). Diesel is about a buck more. I wonder how much the loss of Sunoco’s big refinery in NJ sometime back has had on east coast gas prices?
The Fed’s continued bond purchases with maturing bond equity is suppressing yields.