The kind of official inflation data that would have kited stocks a few months ago today leaves them nonplussed. This morning’s PCE deflator release showed October prices up 3.0% versus October of last year. Mellow compared with media expectations for 3.1% and a September figure of 3.4%. Not long ago such data would have lit a fire under stock prices amid a barrage of breathless speculation about an easier Fed dead ahead.
That fire is conspicuous by its absence, suggesting the effect of the data is being counterbalanced by something else. Flagging corporate profits perhaps?
The softening of the consumer price data is unsurprising, reflecting the exhaust fumes of the mild deflationary squall reflected first in declining stock prices between July 31 and October 27, which in turn reflects an increase in the value of the dollar in real time markets. Stocks have since rallied hard though, as the dollar has since given back much of its strength, so forgive me if I’m not getting excited about the prospects for continued declines in consumer price inflation.
Unlike most of the financial media, including the most erudite and sophisticated analyses of popular econometric statistica of everything from GDP and employment to PMI and diffusion indices. They are lagging indicators. If you want real time data, the only place to go is real time markets.
The monster rally out of the October 27 bottom in stock prices has also reverberated through commodities prices, including both copper and gold. Because it’s not as much about the stocks and copper and gold as it is about the dollar we’re pricing them in.
What about bonds?
Same story. Treasuries bottomed on October 19. We won’t know with certainty until much longer after the fact, but it appears the Great Bear Market of 2020-2023 ended on that date, and a new bull market began. If so, I will finally be right on bonds. But no victory lap here; I was a year early, which isn’t that different from being wrong.
So what makes me think we are, after all this time, there yet? Too much to capture everything in words, most of which has been covered in numerous prior posts over the past year, and some of which appears directly above. A conspicuous new addition is the apparent completion of a full five waves down in Elliott Wave terms, sometimes colloquially referred to as a triple waterfall. In the spirit of a picture is worth a thousand words: