Below is a chart and brief excerpt from today's Early Look written by Hedgeye CEO Keith McCullough.
For those of you who have some touristy type friends who are new to this whole cross-asset-class correlation and @Hedgeye GIP modelling thing, here are some basics about bond yields and the yield curve:
A) The ROC (rate of change) of employment growth and inflation move the long-end of the yield curve
“Shocking the short-end” means what it means. I guess consensus was quite literally shocked into believing that the Fed now believes in the Hedgeye Inflation Nowcasts!
To review (not new news this morning), our current headline CPI Nowcasts for the next 3 quarters are:
Front-running our own models, if I plug what I’m still looking for from Oil ($75 WTI), that Q4 of 2021 Nowcast will shoot back above +4% inflation, no problem. That’s a 2 bagger on the Fed’s “optimal average”, or whatever they call it.