|
Editor's Note: Below is a quick breakdown of this week's CPI number. For more research, check out Hedgeye's Market Edges newsletter that is sent to subscribers every Monday. Learn more here. |
Well, the Bureau of Labor Statistics (BLS) released their June Consumer Price Index (CPI) number yesterday. CPI measures the percentage change in the level of prices of consumer goods and services and is commonly used to measure inflation.
It was bad—really bad. Like the worst since Ronald Reagan’s first year in office kind-of-bad.
It clocked in at a shocking 9.1% YoY, beating estimates of 8.8%. It was a big jump from the already elevated 8.6% reported last month. This 40-year high in inflation acceleration further confirms Hedgeye’s thesis that the Fed will continue hiking rates into a historic economic slowdown.
Among other things, our process at Hedgeye focuses on being ahead of consensus and frontrunning the Fed. While the #OldWall slavishly focuses on 50-day moving monkeys, our unique approach helps investors recognize larger themes associated with a report like this one.
Hedgeye CEO Keith McCullough reminded our subscribers recently that, “we’ve been saying since the beginning of January that the Federal Reserve is going to tighten into one of the biggest #Quad4 slowdowns of the modern era. Now, they’re going to tighten into a recession.”
He was right.
Our Macro analyst Ryan Ricci provides some additional insight:
|
“I’m a little shocked that people focus so much on these monthly CPI prints. They could use a subscription to Hedgeye because, as we have been saying, Recession > Inflation. Elevated inflation levels translate to those in lower income levels (whose savings are already being depleted) being squeezed the hardest, but the broader impact is how the Fed will see our current macro set up. We have high inflation and strong labor from a levels standpoint (what the fed cares about). We also have most other global economies raising rates. Is there a little bit of ‘Well he did it too so I’m not in the wrong?’ I don’t know or care because they missed inflation from May 20th until today… To summarize, the Fed will almost certainly stay on the path of raising rates. Since 2020, the monetary supply has been growing. Now that we have reached the peak of Mount Everest, congrats, but we now must find a way down. The Fed’s rate hikes equate to sprinting down from the summit at full speed. The dream of a ‘soft landing’ is quickly becoming more fantasy than reality.” |
A recession seems to be a foregone conclusion at this point.
The most important thing right now for investors is to allocate your portfolio accordingly to spare yourself from further losses. The Hedgeye #Quads were designed exactly for this reason—to help you navigate through any economic environment, put the odds in your favor, and give you confidence in how to be positioned.
Subscribe to the Early Look to get comprehensive callouts and positioning parameters each morning before market open.
