"Success is how high you bounce when you hit bottom." ~ George S. Patton

Editor's Note: We apologize for the delay in publication due to technical difficulties.

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Last week was a challenging one for markets. Still, the overall message to us, says Fundstrat Head of Research Tom Lee, is that "companies are delivering strong earnings and investors are still wary that inflation might be accelerating." We will look forward to a better answer with April CPI, in a few weeks.

Looking back, the first three inflation reports of 2024 show inflation has been higher than in the last 3 months of 2023. The broader question is whether inflation is actually accelerating. In our view, inflation has been tracking better than the CPI/PCE reports imply, as U Mich 1-yr inflation expectations are muted at 3.1% and below 20-year avg at 3.2% or 40-year average of 3.6%. 1Q24 conference calls see the lowest number of references to "inflation is a problem" since 1Q21. Median Core CPI component inflation is 1.76% YoY, below the long-term average of 2.4%

As we've noted in our research, the higher inflation of Core CPI is primarily due to shelter remaining high (but statistically lagging) and the soaring of auto insurance premiums. Still, stresses Lee, this does not neutralize ...

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