INTRADAY ALERT: Equities over-reacting to "hot" Jan CPI. The 1Q24 top will be when "stocks sell off on good news" -- so today is not likely the top.

The video in this report is only accessible to members
The video in this report is only accessible to members
The video in this report is only accessible to members
The video in this report is only accessible to members

THIS INTRADAY ALERT IS SENT SOLELY TO CLIENTS OF FS INSIGHT

Equites are selling off >1% today ($IWM off >3%) after Jan CPI came in "hot" vs consensus with Core CPI +0.39% (vs consensus +0.30%). Is this an over-reaction? Yes. Should investors buy this dip? Yes. We think this is still too early to "call the top" for 1Q2024. Let me explain:

The bond market is selling off sharply (yields up) with 10-yr yields now 4.285%, and way up from 3.865% just a week ago. And post this CPI report, we are hearing some economists/pundits suggest the Fed could even further delay rate cuts because of today's report. In our view, this is an over-reaction to a singular CPI print. And the stock market reaction is also overdone as well. Why? Foremost, there are really 4 culprits behind today's "hot" CPI:- Shelter accelerated --> OER sticky, but not forever- Auto insurance accelerated --> surging, but not forever- Misc personal svcs --> stock surge = fincl svcs CPI surge, not forever- Hospital Services surge --> we flagged, not sure what's behind this- 3 of 4 culprits not really stuff that "scares Fed now" but are lingering issues Renaissance Macro posted an X (tweet?) highlighting that OER (owner's equivalent rent) surged higher to 6.94% ...
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