Overreaction To A Good CPI Print? Why You Should Let The Trend Sort Itself Out

Overreaction To A Good CPI Print? Why You Should Let The Trend Sort Itself Out

November 10, 2022

From the desk of Vance Howard:

The market’s reaction this morning is very positive to the news that core inflation looks to be slowing down. Remember, one data point does not make a trend, and the Fed has been very clear that they will not let up until inflation is under control. The trend is still decisively down, and we will be patient and let the market tell us when to buy and re-enter the market.

The OECD U.S. Composite Leading Indicator (CLI) continued to decline in October, falling 0.1 point to 98.5, below 100 for the seventh consecutive month, indicating below-trend growth ahead. The drag was mainly due to high inflation, rising interest rates, and falling stock prices. The index has been grinding down since its cycle peak in May 2021, and is now at its lowest level in more than two years. Excluding the pandemic, it is at the lowest level since November 2009

The annualized six-month rate of change of the CLI edged up slightly to -2.6%, barely in the zone that historically has been consistent with positive economic growth. Nevertheless, this was an improvement from the prior month, which at the very least suggests a slower rate of deceleration in economic activity over the next several months.


Vance Howard

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