Houston, We Have a Problem

The past two days of inflation data make it abundantly clear that inflation’s slump is slumping. But, don’t take our word for it. Just ask the bond market, where the 10Y has soared from 3.6% to 4.5% in less than two months.

Headline CPI, which had dipped as low as 2.44% in September, jumped to 2.60% in October. And, the components of the print were problematic. Energy is in the final stages of its YoY decline and, in the absence of peace breaking out in the Middle East, will soon show YoY gains. Shelter, at nearly 5% YoY, remains quite sticky and unlikely to trend lower unless we enter a full blown recession.

And, this morning’s PPI print reminds us that neither goods nor services are trending lower.With nearly every economist on the planet agreeing that Trump’s tariffs will stoke further inflation, what does this mean for the economy and the markets?