So…the coronavirus isn’t tapering off after all. Not to worry, though, says WHO adviser Ira Longini. It should only infect about 5 billion people.
Having said that, don’t expect that the folks whose job it is to advance the never-ending rally to give up now. Consider how well the market muddled through during the Spanish Flu. And, that was before central banks assumed control of markets. Meanwhile, annual CPI came in right at our expected number of 2.5%, thanks to the YoY oil/gas price boom as we’ve been discussing for the past several months.
For those looking for a big bounce from oil/gas, don’t get too excited just yet. The delta in gas prices for Feb is shaping up as a 5% YoY gain – not as extreme as in Jan but still a factor. For a Fed which is looking for excuses to keep rates low, a big rally in oil/gas right now would be quite inconvenient.
With services inflation up 3.1% YoY, the interesting question is what will happen to goods inflation. Slowing global trade could reduce overall demand, but interrupting supply chains could also be expected to create shortages in certain areas such as electronics. Fortunately, the BLS has models which will smooth these things away.
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