After Ukraine fired a longer-range ATACMS missile into Russia for the first time, Russia amended its nuclear doctrine to consider aggression from a non-nuclear state with the participation of a nuclear country to be a joint attack on Russia.
The futures market quickly sold off by about 1% before algos kicked in to limit the damage.
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Futures are up very slightly after a week that saw prices begin to slump right on cue.
Unfortunately for bulls, the slump is not over.
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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?
NOTE: Powell will speak on “Global Perspectives” at 3pm ET. Catch it HERE.
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Headline CPI rose 0.2% for the fourth straight month in October. Year-over-year, however, it increased by 2.6% versus 2.4% in September. This was in line our with expectations and increases the odds of the pause we’ve forecast for December’s meeting.
Core CPI’s 3.3% increase (0.3% MoM) further reinforced the market’s concern regarding the inflationary effects of the incoming administration’s plans to enact sweeping tariffs on imported goods.
Futures are slightly higher as yields however around important levels of resistance.
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Futures are off slightly on the eve of another important CPI print.
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SPX reached our 6009 target (from August) two days ahead of schedule, leaving ES 6064 as the last remaining upside target in the vicinity. With ES reaching 6053 overnight, this rally is either due a pullback or a breakout. In short, it’s another moment of truth for equities.
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It was a typical Fed press conference, with Powell ducking and dancing around any substantive revelations, when someone asked whether the election would affect the Fed’s policy decisions. It was no surprise that Powell fell back on the usual 200-word “data dependence” answer that we’ve all heard before.
Then someone asked the question that was really on everyone’s mind: Would Powell step down if Trump requested it? Powell responded with a one-word answer: “No.” Ladies and gentlemen, 2025 just got a lot more interesting.
I was dead wrong when suggesting that Powell couldn’t resign fast enough. I assumed that Powell would rather crawl through broken glass than spend another 4 years under Trump’s withering criticism. Apparently Jay is made of sterner stuff.
And, why not? Trump’s constant and very public pressure was at least partly responsible for the Fed keeping interest rates as low as they did even after inflation increased. Somewhere on the road from 2% to 9.1% CPI, Powell must have been wishing for a rematch. Now he’ll have one.
ES has topped its IH&S target and is eyeing a backtest, with a potential tag of the 1.618 at 6064.50.
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Following the shocking election results in the US, futures actually tagged our downside support at the 50-day moving average and, in a 2% surge, our next upside target.
The spike has all the hallmarks of a pop and drop, however, as the 10Y has broken out.
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Since markets are essentially frozen as we enter the most consequential week of the year, we thought this would be an opportune time to review the big picture.
As always, we began the year [see: A Look Ahead at 2024] with specific targets.
SPX: “The most important chart pattern for SPX is the large Inverted H&S Pattern which completed on Dec 11 [and] points to 5727.” Though we identified a path to completion by June 2024, we noted that “there is definitely a possibility that October works just as well as June.”
SPX came close to our 5727 target in June, but was rebuffed by the Fibonacci 1.618 extension and reached it instead on Sep 24.
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