Good Evening:

Our research heads engaged in a lively discussion Thursday morning in New York. Here are the highlights:

Tom Lee, Head of Research: The Fed has an optics problem

The other day, Lee noticed something when shopping at the grocery store: prices were lower, and some items were on sale. It underscores his belief that beneath the 41-year-high inflation number, prices are coming down. Food prices are falling, gasoline prices are falling, airfares are falling, commodities are falling, home prices are rolling over and real wages are falling too.

“Markets are still under pressure,” Lee said. “There hasn't been a good break in the inflation data. The CPI this week was a tough number for the Fed because they just have a huge optics problem. Headline CPI is 9%. We're in a tough spot. The good news is I think it will lead to a break. ... July will be first month we start to see lower gasoline show up in the CPI. Things in core inflation are still being affected by supply chains. But the leading indicators are saying inflation is rolling over. The public just doesn't see it because the headline CPI number is huge and there's still an optics problem for the Fed. That puts a lot of weight on the next couple of CPI reports.”

Lee’s question, then, is: “Are ...

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