The Bureau of Labor Statistics reports inflation came in hotter than Keynesian economics expected. Our work on money supply versus the economy, which we discussed in our video on inflation, told us inflation would remain higher for longer.
This is an uncomfortable expectation, to be sure, as the price of financial assets will fall to align with this new reality.
Inflation higher for longer means the Fed’s work is not done, and markets will take interest rates higher. The 2-year Treasury is up 15 basis points on the inflation news.
The table above, published by the BLS, shows the CPI number details. It is up 8.2% overall year over year. Food and energy are up big, which hurts because we all need to eat and drive our carts to work. Winter is approaching, and people will need to hear their homes. The number that is still massively underreported is shelter. The BLS says it is up 6.6% year over year. They do not use market prices to calculate this number. It comes from a survey of households where the government asks people what they think they could rent their house. Companies like Zillow report rents up more than 20% yearly. This measure is based on actual rental contracts. Ergo, housing in the CPI index shows inflation with a lag.
Stocks are not taking the news of high inflation for longer well in premarket trading. It looks like Thursday will be an ugly day. We will not offer any trade suggestions today. We have shared many bearish ideas, and we hope our subscribers did their homework and participated in a few. These folks are positioned for this move and will be rewarded handsomely for getting ahead of this trend.
