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Despite a flat out bad June CPI report, Fed officials sound “measured” (vs “expeditious”)…arguably enabling equities to see “less bad”

Despite a flat out bad June CPI report, equities starting to see “less bad”

In the 36 hours since the horrific June CPI report, equities have managed to better with Technology stocks managing gains.

  • initial “hawkish” market reaction was to price near 100% odds of +100bp for July hike
  • but as the Fed funds futures chart shows, this was reversed during the trading session Thu
  • this is the first sign, in our view, of a change in the Fed’s reaction function to “measured”
  • unlike the May CPI (June 10th release) where Fed made “expeditious” move to +75bp (from +50)
  • Fed officials seem far more measured in their reaction to June CPI

This is change, in our view, that should be favorable to equities. If the Fed moves towards a “measured” approach, instead of “expeditious”, this means fewer negative shock to markets.

  • and if incoming data starts to support a weakening inflation narrative

this further supports equities re-rating higher

Fed’s Waller and Bullard made “measured” comments today

Two Fed governors made comments today and as highlighted below, their statements are “measured” in their reaction to the horrific June CPI print. Bullard is St. Louis Fed President. Waller has been on the Board since 2020.

neither seem supportive of...

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