Blowout Inflation is Here

April CPI came in at 4.2%, a rate not seen since August 2008.

CPI has topped 4.2% only twelve months in the past 30 years, with the bulk of those instances during Jan-Sep 2008 when CPI pushed above 10Y yields.

The Fed has managed (so far) to keep a lid on yields, providing additional evidence that the bond market remains broken and is no longer a valid source of price discovery.The details indicate the actual number should be higher, even by the BLS’ deceptive standards.  Gasoline, for instance, is listed as having experienced a 49.6% YoY increase…

…though the actual increase was 62%. Rent has risen 10%, well above the shelter increase of 2.1% cited by the BLS.

The rise in both CPI and gas prices continued the high positive correlation seen over the past several years.

The effect on equities has also been muted so far. As with bonds, it has nothing to do with markets “shrugging off” data.

The bond market’s supposed reaction to the most significant economic data of the past 15 months.

Cue the Fed doves, who will continue to insist that rapidly rising prices are a good thing. Wouldn’t it be nice if, just once, the MSM would ask them to explain how spiking food, gas, rent and used car prices will benefit the average American – you know, the ones they claim to care so much about?

By now, it should be obvious that the billlions being thrown at markets is intended to prop up stocks and keep interest rates from breaking out. Remember…when the 10Y broke above and then failed to hold the red TL in Sep 2018, SPX promptly began a 20% correction.

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