It's politics...U Mich inflation surge solely political divide. Rep see +0.1% vs Dems see +4.2%... Yup

Tom Lee, CFA
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Equity markets are under selling pressure due in part to a solid jobs report (actually a good thing) and intensified by a “really hot” U Mich consumer inflation survey reading with a surprise rise to +3.3% (1-yr) from +2.8% last month:

  • This U Mich data point intensified selling of equities and pushed rates higher because this suggests that US consumers are expecting accelerating inflation.
    – Jan U Mich 1-yr 3.3%
    – Dec U Mich 1-yr 2.8%
    – Nov U Mich 1-yr 2.6%
    – Oct U Mich 1-yr 2.7%
  • However, as the data below clearly highlights, this is solely due to the political divide and the election of Trump to the White House. Consider:
    – Month…..Dem……Rep
    – Jan +4.2% 0.1%
    – Dec +3.1% +1.3%
    – Nov +1.8% +2.6%
    – Oct +1.5% +3.6%
  • Notice the very obvious pattern? I can spell it out:
    – Democratic respondents: suddenly inflation explodes from 1.5% (Oct) to 4.2% (Jan)
    – Republican respondents: suddenly inflation collapses from 3.6% (Oct) to 0.1% (Jan)
  • How do respondents see a complete flip in inflation views? Ummm…
  • To me, this means this U Mich inflation survey looks “very political” because the only change between Oct to now is the Republicans taking the White House and Congress and the Harris White House loss.
  • The Dec jobs report came in at +256k vs +165k consensus. This is a strong number but wages holding at +3.9% YoY. And as Chicago Fed President Austin Goolsbee noted, this is not a level associated with wage-driven inflationary pressures.

Bottom line, this is turbulent for markets near-term.

As Mark Newton, Head of Technical Strategy, noted, we are potentially targeting S&P 500 5,700 near-term but then markets could reverse higher into inauguration (1/20). But keep in mind, we don’t see fundamentals changing due to this U Mich report nor the Dec jobs report.

  • VIX is near 20, which is a sign of panic and a sign we are nearing a bottom
  • First 5 days were positive for 2025, a good omen for the year
  • But please be aware this U Mich survey looks completely polluted by political views.


It's politics...U Mich inflation surge solely political divide. Rep see +0.1% vs Dems see +4.2%... Yup

It's politics...U Mich inflation surge solely political divide. Rep see +0.1% vs Dems see +4.2%... Yup

It's politics...U Mich inflation surge solely political divide. Rep see +0.1% vs Dems see +4.2%... Yup

It's politics...U Mich inflation surge solely political divide. Rep see +0.1% vs Dems see +4.2%... Yup

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It's politics...U Mich inflation surge solely political divide. Rep see +0.1% vs Dems see +4.2%... Yup

It's politics...U Mich inflation surge solely political divide. Rep see +0.1% vs Dems see +4.2%... Yup

It's politics...U Mich inflation surge solely political divide. Rep see +0.1% vs Dems see +4.2%... Yup

It's politics...U Mich inflation surge solely political divide. Rep see +0.1% vs Dems see +4.2%... Yup

It's politics...U Mich inflation surge solely political divide. Rep see +0.1% vs Dems see +4.2%... Yup

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Tom Lee, CFA
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