![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://cdn.fsinsight.com/wp-content/uploads/2024/01/FSIPublicationScheduleFWMMSkips1.png)
![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://fundstrat.com/wp-content/uploads/2024/01/image-70-1.png)
![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://fundstrat.com/wp-content/uploads/2024/01/image-71-1-1024x489.png)
VIDEO: We discuss how the Dec CPI was actually very good, only blemished by auto insurance which is now 50% of core services CPI. (Duration: 4:41).
December CPI was released yesterday with core CPI coming in at +0.31% MoM, slightly ahead of consensus of +0.3%. Many pundits viewed this report as evidence inflation progress is too slow and even Cleveland Fed President Mester weighed in yesterday, saying yesterday’s report another argument why Fed should not cut in March. Our analysis of the inflation report, however, suggests the opposite. This was a very good CPI report and inflation is still falling like a rock, likely again in evidence in January CPI report.
- 3 of top 5 contributors to Core CPI in Dec are auto-related:
– Shelter ex-hotels +0.20% (of Core CPI)
– Auto insurance +0.06
– Recreation svcs +0.04
– Used cars +0.02
– New cars +0.01
Total Core CPI +0.31% - Auto insurance is 3.6% weight and was 20% of Core CPI inflation. That is punching way above its weight. Auto insurance prices are surging because of huge loss severities from the past few years. The reason being car prices surged post-pandemic sending up a huge rise in auto repair bills. This means, auto insurance is simply rising to catch up with the previous surge in car prices.
- Car prices are now falling. So, does Fed keep hiking because of auto insurance rates going up? Ex-autos, core CPI would have been +0.25%, or basically on target. In other words, we don’t see the logic in the Fed even delay cutting if inflation outside of autos is coming back into target.
- Core Services ex-housing CPI came in at +0.41%, which is also considered a “hot” reading:
– Auto insurance +0.18% (of core services)
– ex-Auto insurance +0.23%
– in other words, core services ex-auto insurance is on Fed’s target as well - See the bigger picture?
– auto insurance is not rising because of easy money.
– nor is it because of easing financial conditions
– nor is it rising because of Fed funds being too low - It is rising because auto insurers are trying to recover from losses of previous years.
- Outside of that inflation is on a glidepath lower. Thus, we believe inflation is tracking below consensus views. And yesterday’s CPI report is supportive of this view. We believe the January CPI report will likely show similar takeaways.
Bottom line: We still see markets as making new highs in January, despite the turmoil yesterday
Our base case for 2024 remains a tricky 1H, with the bulk of gains made in the second half of 2024. Yesterday’s turmoil around the December CPI report is a snapshot of this, in my opinion.
- Because we came within 1% of all-time highs (ATH) in December, we see new highs in January as this was the case 12 of the 12 precedent instances since 1950. That is, after falling 20% and recovering to within 1% of ATH, there has never been a case of a failure. New ATH within 20 trading days, or late Jan at worst.
- But we are not in a full “risk-on” environment. That is likely later in first half or early 2H. We have outlined this multiple times and we think this is largely due to the market’s impatience with Fed cut framework (not clear). Mark Newton, head of Technical Strategy, also sees weakness into March.
- Our favorite sector in 2024 remains small-caps IWM 0.59%
- Our favorite large-cap is Financials XLF 0.77%
- We also like Industrials given the bottoming of PMIs XLI 0.98%
- And visibility strong with FAANG/Technology QQQ 1.15% XLK 1.35%
![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://fundstrat.com/wp-content/uploads/2024/01/image-90.png)
![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://fundstrat.com/wp-content/uploads/2024/01/image-89.png)
![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://fundstrat.com/wp-content/uploads/2024/01/image-91.png)
![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://fundstrat.com/wp-content/uploads/2024/01/image-94-1024x839.png)
![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://fundstrat.com/wp-content/uploads/2024/01/image-92.png)
![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://fundstrat.com/wp-content/uploads/2024/01/image-93.png)
![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://fundstrat.com/wp-content/uploads/2024/01/image-95.png)
![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://fundstrat.com/wp-content/uploads/2024/01/image-96.png)
![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://fundstrat.com/wp-content/uploads/2024/01/image-97.png)
Key incoming data January:
1/02 9:45am ET S&P Global Manufacturing PMI December FinalMixed1/03 10am ET December ISM ManufacturingTame1/03 10am ET JOLTS Job Openings NovemberTame1/03 2pm ET December FOMC Meeting MinutesTame1/04 9:45am ET S&P Global Services & Composite PMI December FinalTame1/05 8:30am ET December Jobs ReportMixed1/05 10am ET December ISM ServicesTame1/08 9am ET Manheim Used Vehicle Index December FinalTame- 1/
11 8:30am ET December CPIDetails Suggest Tame - 1/12 8:30am ET December PPI
- 1/16 8:30am ET January Empire Manufacturing Survey
- 1/17 8:30am ET January New York Fed Business Activity Survey
- 1/17 8:30am ET December Retail Sales Data
- 1/17 9am ET Manheim Used Vehicle Index January Mid-Month
- 1/17 10am EST January NAHB Housing Market Index
- 1/19 8:30am ET January Philly Fed Business Outlook Survey
- 1/19 10am ET U. Mich. Sentiment and Inflation Expectation January Prelim
- 1/24 9:45am ET S&P Global PMI January Prelim
- 1/25 8:30am ET 4QA 2023 GDP
- 1/26 8:30am ET December PCE
- 1/29 9:30am ET Dallas Fed January Manufacturing Activity Survey
- 1/30 9am ET January S&P CoreLogic CS home price
- 1/30 10am ET January Conference Board Consumer Confidence
- 1/30 10am ET JOLTS Job Openings December
- 1/31 2pm ET FOMC Rate Decision
Key incoming data December
12/01 9:45am ET S&P Global Manufacturing PMI November FinalTame12/01 10am ET November ISM ManufacturingStrong12/05 9:45am ET S&P Global Services & Composite PMI November FinalStrong12/05 10am ET JOLTS Job Openings OctoberTame12/05 10am ET November ISM ServicesStrong12/06 8:30am ET 3QF 2023 Nonfarm ProductivityStrong12/07 9am ET Manheim Used Vehicle Index November FinalTame12/08 8:30am ET November Jobs ReportTame12/08 10am ET U. Mich. Sentiment and Inflation Expectation December PrelimTame12/12 8:30am ET November CPITame12/13 8:30am ET November PPITame12/13 2pm ET FOMC Rate DecisionDovish12/14 8:30am ET November Retail Sales DataTame12/15 8:30am ET December Empire Manufacturing SurveyTame12/15 9:45am ET S&P Global PMI December PrelimTame12/18 8:30am ET December New York Fed Business Activity SurveyTame12/18 10am ET December NAHB Housing Market IndexTame12/19 9am ET Manheim Used Vehicle Index December Mid-MonthTame12/20 10am ET December Conference Board Consumer ConfidenceTame12/21 8:30am ET 3QT 2023 GDPMixed12/21 8:30am ET December Philly Fed Business Outlook SurveyMixed12/22 8:30am ET November PCETame12/22 10am ET: U. Mich. Sentiment and Inflation Expectation December FinalTame12/26 9am ET December S&P CoreLogic CS home priceTame12/26 10:30am ET Dallas Fed December Manufacturing Activity SurveyTame- 12/29 9:45am ET December Chicago PMI
Key incoming data November
11/01 9:45am ET S&P Global PMI October FinalTame11/01 10am ET JOLTS Job Openings SeptemberMixed11/01 10am ET October ISM ManufacturingTame11/01 10am ET Treasury 4Q23 Quarterly Refunding Press ConferenceTame11/01 2pm ET FOMC Rate DecisionDovish11/02 8:30am ET: 3Q23 Nonfarm ProductivityTame11/03 8:30am ET October Jobs ReportTame11/03 10am ET October ISM ServicesMixed11/07 9am ET Manheim Used Vehicle Index October FinalTame11/10 10am ET U. Mich. November prelim Sentiment and Inflation ExpectationHot11/14 8:30am ET October CPITame11/15 8:30am ET October PPITame11/15 8:30am ET November Empire Manufacturing SurveyResilient11/15 8:30am ET October Retail Sales DataResilient11/16 8:30am ET November New York Fed Business Activity SurveyTame11/16 8:30am ET November Philly Fed Business Outlook SurveyTame11/16 10am ET November NAHB Housing Market IndexTame11/17 9am ET Manheim Used Vehicle Index November Mid-MonthTame11/21 2pm ET Nov FOMC Meeting MinutesTame11/22 10am ET: U. Mich. November final Sentiment and Inflation ExpectationTame11/24 9:45am ET S&P Global PMI November PrelimMixed11/27 10:30am ET Dallas Fed November Manufacturing Activity SurveyTame11/28 9am ET November S&P CoreLogic CS home priceTame11/28 10am ET November Conference Board Consumer ConfidenceTame11/29 8:30am ET 3QS 2023 GDPStrong11/29 2pm ET Fed Releases Beige BookTame11/30 8:30am ET October PCETame
Key incoming data October
-
10/2 10am ET September ISM ManufacturingTame -
10/3 10am ET JOLTS Job Openings AugustHot -
10/4 10am ET September ISM ServicesTame 10/6 8:30am ET September Jobs ReportMixed-
10/6 9am ET Manheim Used Vehicle Index September FinalTame 10/10 11am NY Fed Inflation ExpectationsMixed-
10/11 8:30am ET September PPIMixed 10/11 2pm ET Sep FOMC Meeting MinutesTame-
10/12 8:30am ET September CPIMixed -
10/13 10am ET U. Mich. September prelim 1-yr inflationMixed 10/16 8:30am ET October Empire Manufacturing SurveyTame10/17 8:30am ET October New York Fed Business Activity SurveyTame10/17 8:30am ET September Retail Sales DataHot10/17 9am ET Manheim October Mid-Month Used Vehicle Value IndexTame10/17 10am ET October NAHB Housing Market IndexTame10/18 8:30am ET September Housing StartsTame10/18 2pm ET Fed releases Beige BookTame10/19 8:30am ET October Philly Fed Business Outlook SurveyTame10/19 10am ET Existing Home SalesTame10/19 12pm ET Fed (including Powell) at Economic Club of New York10/24 9:45am ET S&P Global PMI October PrelimTame-
10/26 8:30am ET 3Q 2023 GDP AdvanceStrong 10/27 8:30am ET September PCETame10/27 10am ET Oct F UMich Sentiment and Inflation expectationTame10/30 10:30am ET Dallas Fed September Manufacturing Activity SurveyTame10/31 8:30am ET 3Q23 Employment Cost IndexMixed10/31 9am ET August S&P CoreLogic CS home priceMixed10/31 10am ET October Conference Board Consumer ConfidenceTame
Key incoming data September
9/1 8:30am ET August Jobs ReportTame9/1 10am ET August ISM ManufacturingTame9/6 10am ET August ISM ServicesMixed9/6 2pm ET Fed releases Beige BookTame9/8 9am ET Manheim Used Vehicle Index August FinalTame9/8 2Q23 Fed Flow of Funds ReportTame-
9/13 8:30am ET August CPIMixed -
9/14 8:30am ET August PPITame -
9/15 8:30am ET September Empire Manufacturing SurveyTame 9/15 10am ET U. Mich. September prelim 1-yr inflationTame-
9/18 8:30am ET September New York Fed Business Activity SurveyTame -
9/18 10am ET September NAHB Housing Market IndexTame 9/19 9am ET Manheim September Mid-Month Used Vehicle Value IndexMixed9/20 2pm ET September FOMC rates decisionMarket saw Hawkish-
9/21 8:30am ET September Philly Fed Business Outlook SurveyMixed 9/22 9:45am ET S&P Global PMI September Prelim9/25 10:30am ET Dallas Fed September Manufacturing Activity Survey9/26 9am ET July S&P CoreLogic CS home price9/26 10am ET September Conference Board Consumer Confidence
Key incoming data August
8/1 10am ET July ISM ManufacturingTame8/1 10am ET JOLTS Job Openings JunTame8/2 8:15am ADP National Employment ReportHot8/3 10am ET July ISM ServicesTame8/4 8:30am ET July Jobs reportTame8/7 11am ET Manheim Used Vehicle Index July FinalTame8/10 8:30am ET July CPITame8/11 8:30am ET July PPITame8/11 10am ET U. Mich. July prelim 1-yr inflationTame8/11 Atlanta Fed Wage Tracker JulyTame8/15 8:30am ET Aug Empire Manufacturing SurveyMixed8/15 10am ET Aug NAHB Housing Market IndexTame8/16 8:30am ET Aug New York Fed Business Activity SurveyNeutral8/16 2pm ET FOMC MinutesMixed8/17 8:30am ET Aug Philly Fed Business Outlook SurveyPositive8/17 Manheim Aug Mid-Month Used Vehicle Value IndexTame8/23 9:45am ET S&P Global PMI Aug PrelimWeak8/25 10am ET Aug Final U Mich 1-yr inflationMixed8/28 10:30am ET Dallas Fed Aug Manufacturing Activity SurveyTame8/29 9am ET June S&P CoreLogic CS home priceTame8/29 10am ET Aug Conference Board Consumer ConfidenceTame8/29 10 am ET Jul JOLTSTame8/31 8:30am ET July PCETame
Key incoming data July
7/3 10am ET June ISM ManufacturingTame7/6 8:15am ADP National Employment ReportHot7/6 10am ET June ISM ServicesTame7/6 10 am ET May JOLTSTame7/7 8:30am ET June Jobs reportMixed7/10 11am ET Manheim Used Vehicle Index June FinalTame7/12 8:30am ET June CPITame7/13 8:30am ET June PPITame7/13 Atlanta Fed Wage Tracker JuneTame7/14 10am ET U. Mich. June prelim 1-yr inflationMixed7/17 8:30am July Empire Manufacturing Survey7/18 8:30am July New York Fed Business Activity Survey7/18 10am July NAHB Housing Market Indexin-line7/18 Manheim July Mid-Month Used Vehicle Value IndexTame7/25 9am ET May S&P CoreLogic CS home priceTame7/25 10am ET July Conference Board Consumer ConfidenceTame7/26 2pm ET July FOMC rates decisionTame7/28 8:30am ET June PCETame7/28 8:30am ET 2Q ECI Employment Cost IndexTame7/28 10am ET July Final U Mich 1-yr inflationTame
Key data from June
6/1 10am ET May ISM ManufacturingTame6/2 8:30am ET May Jobs reportTame6/5 10am ET May ISM ServicesTame6/7 Manheim Used Vehicle Value Index MayTame6/9 Atlanta Fed Wage Tracker AprilTame6/13 8:30am ET May CPITame6/14 8:30am ET May PPITame6/14 2pm ET April FOMC rates decisionTame6/16 10am ET U. Mich. May prelim 1-yr inflationTame6/27 9am ET April S&P CoreLogic CS home priceTame6/27 10am ET June Conference Board Consumer ConfidenceTame6/30 8:30am ET May PCETame6/30 10am ET June Final U Mich 1-yr inflationTame
Key data from May
5/1 10am ET April ISM Manufacturing (PMIs turn up)Positive inflection5/2 10am ET Mar JOLTSSofter than consensus5/3 10am ET April ISM ServicesTame5/3 2pm Fed May FOMC rates decisionDovish5/5 8:30am ET April Jobs reportTame5/5 Manheim Used Vehicle Value Index AprilTame5/8 2pm ET April 2023 Senior Loan Officer Opinion SurveyBetter than feared5/10 8:30am ET April CPITame5/11 8:30am ET April PPITame5/12 10am ET U. Mich. April prelim 1-yr inflationTame5/12 Atlanta Fed Wage Tracker AprilTame5/24 2pm ET May FOMC minutesDovish5/26 8:30am ET PCE AprilTame5/26 10am ET U. Mich. April final 1-yr inflationTame5/31 10am ET JOLTS April job openings
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![The Dec CPI details far better…ex-auto insurance, core CPI +0.25% MoM. Inflation still falling like a rock.](https://cdn.fundstrat.com/wp-content/uploads/2023/09/image-255.png)