The initial surge in the S&P 500 on the back of a very encouraging CPI inflation report has quickly faded ahead of today’s scheduled FOMC meeting statement.

After rallying ~2% to start the day on Tuesday, markets have cooled off as the realization that 7% inflation still suggests the Fed has a long way to go. But after breaking one step forward two steps back cycle when the CPI declined only to pop back up again the next month, it opens the door for the FOMC to set a slightly softer tone for longer-term rates at today’s decision. The question is, with inflation still at generational highs, will the Fed walk through that door?

After an initially high-spirited response, the relatively muted reaction for stocks is likely attributable to pre-risk event positioning, with substantial gains on Monday, prevailing bearish growth sentiment, technical factors and the devil in the details suggesting service inflation may be unsustainable.

But hope springs eternal that lower US inflation may set the tone for a better environment for corporate growth — especially if central banks can begin to ease up on the tightening cycles.


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With oil finally on the up again, it suggests the recent deep drop is likely another ephemeral air pocket on the turbulent glide path higher against the backdrop of solid demand in 2023 driven by China’s reopening and an expected Chinese travel boom. And as we pointed out yesterday, China easing internal travel restrictions, was a big tell that policymakers are on the fast track to instituting quarantine-free travel.


Published by Stephen Innes, Managing Partner, SPI ASSET MANAGEMENT