Sept Core CPI "hot" vs consensus, but internals show inflation still falling. Plus, too much cash on sidelines

Sept Core CPI hot vs consensus, but internals show inflation still falling.  Plus, too much cash on sidelines
Sept Core CPI hot vs consensus, but internals show inflation still falling.  Plus, too much cash on sidelines
Sept Core CPI hot vs consensus, but internals show inflation still falling.  Plus, too much cash on sidelines
Sept Core CPI hot vs consensus, but internals show inflation still falling.  Plus, too much cash on sidelines

The Sept Core CPI came in at +0.31% vs Street +0.26%. This is higher (“hot”) than expected. But we think this report will have little effect on the Fed’s thinking on future cuts, thus, we expect this to be not meaningful for stocks in the near term:

  • The upside drivers for Core CPI remain shelter and auto insurance, the two top contributors to Core CPI
    – shelter +0.14%
    – auto insurance +0.04%
    – although shelter slowed from +0.21% last month
  • Regionally, inflation surged in MS, TN, KY, AL with +0.97% MoM. That is 12% annualized. I have no idea why MoM would surge so much there.
  • Jens Nordvig, economist, suggests this could be the “seasonal” reset that happens in the Fall. His insights are shared below and via X.com
  • But the internals show inflation continues to fall and this is the more important metric:
    – % components in outright deflation is 44%, new cycle high and up from 43% last month
    – % components below pre-pandemic avg now 55%, new high, vs 54% last month and 50% long-term average
  • So ultimately, inflation is cooling and there is some noise that makes MoM seem like it is going up
  • We believe the Fed will assign less weight to this and probably more to jobless claims which rose.

Bottom line: We expect dip buyers to emerge, but Oct remains “iffy”

We expect any substantial dips will be bought. We are still in the “iffy” period until election day and the VIX is the tell.

Sept Core CPI hot vs consensus, but internals show inflation still falling.  Plus, too much cash on sidelines
Sept Core CPI hot vs consensus, but internals show inflation still falling.  Plus, too much cash on sidelines
Source: Fundstrat

Sept Core CPI hot vs consensus, but internals show inflation still falling.  Plus, too much cash on sidelines
Source: X.com

Sept Core CPI hot vs consensus, but internals show inflation still falling.  Plus, too much cash on sidelines
Sept Core CPI hot vs consensus, but internals show inflation still falling.  Plus, too much cash on sidelines

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