“To hell with circumstances – I create opportunities.” ~ Bruce Lee
Before the markets opened on Nov. 1, Tom Lee, Fundstrat’s Head of Research, alerted investors to a burgeoning “baby rally.” Lee made this call after observing the bearish positioning of both institutional and retail investors, as well as the low levels of leverage in the markets. As this week began, those conditions continued to hold – despite Lee’s call for CPI data to show inflation continuing to glide lower.
That led on Tuesday to a “face ripper” rally, as lower gasoline prices led headline CPI down and Core CPI came in at 0.23% MoM versus Street expectations of 0.30%. While this was consistent with his expectations, Lee also noted that “the softside reading came in the right places” – shelter (comprising 42% of Core CPI) and cars (the second-largest component after housing).
In the view of Ken Xuan, Head of Data Science, home prices are critical to the current fight against inflation. “That’s a key battlefield,” he said at our weekly research huddle. “And we know that the home prices are about to fall because of the lagging effects of how the BLS collects home-price data,” he reminded us.Lee was also tracking used car prices. “Many ...