It was the second consecutive down week for the S&P 500, with much of the pressure on stocks this week originating from a hotter-than-expected CPI print, released on Wednesday. Core CPI came in hotter than Fundstrat’s expectations, as well as the Street’s. The MoM reading came in at +0.36%, the same as it was in February.
As Head of Data Science “Tireless” Ken Xuan noted during our weekly research huddle, “If you look at the details of this hot CPI print, the primary culprit is still car insurance, which is still surging at a 22% year-over-year rate, and as we’ve said before, that’s a lagging function of increases in auto prices.” In Xuan’s view, however, inflation is still tanking. “One number does not make a change in the trajectory of inflation,” he asserted.
That sparked a question from Head of Technical Strategy Mark Newton: “We are still seeing auto insurance boosting the numbers, but what about the other components?”
Fundstrat Head of Research Tom Lee had an answer for that. He and his team took a deeper look at the data behind the latest CPI numbers, and while he acknowledged that “we didn’t get the CPI number we wanted,” he found that “the forces of disinflation are still strong. Right now we are seeing the highest share of CPI components with inflation of less than 3% YoY since 2021, and that share is expanding,” he told us this week.
Although the indices ended the week down, Newton said that “technically, we have seen a little bit of a short-term break in the market after a pretty sustained uptrend. I don't sense that this is going to be a big deal. My own thinking is that it's very short-term in nature.”
For Newton’s technical perspective on the markets, “The bigger deal is that interest rates and the dollar have spiked pretty dramatically in the last few days, and stocks are taking their cues from this. But my work suggests that the bigger move in yields is still likely going to be to the downside, and I personally expect to see a pretty rapid decline in yields between the latter part of April until August [2024].”
What is FS Insight?
FS Insight is a market-leading, independent research boutique. We are experts in U.S. macro market strategy research and have leveraged those fundamental market insights to become leading pioneers of digital assets and blockchain research.
Tom Lee's View
Proprietary roadmap and tools to navigate and outperform the equity market.
Macro and Technical Strategy
Our approach helps investors identify inflection points and changes in equity leadership.
Deep Research
Our pioneering research provides an understanding of fundamental valuations and risks, and critical benchmarking tools.
Videos
Our macro and crypto videos give subscribers a quick and easy-to-understand audiovisual updates on our latest research and views.
US Policy Analysis
Our 40-year D.C. veteran strategist cuts through the rhetoric to give investors the insight they need.
