
💸 Inflation Inflection 2.0 - With Easing Inflation, Will The Fed Pivot?
Investors and economists have breathed a sigh of relief as new inflation data suggest that price pressures are easing. While the prices of everyday goods are still significantly higher than a year ago, some of the underlying trends are beginning to reverse. This is largely in line with our Inflation Inflection note earlier this year that inflation would likely start to ease come the summer months. Stocks have rallied as markets price in hopes the Fed will pivot soon. The S&P 500 and the Nasdaq have now gained 16.7% and 22.6%, respectively, since the middle of June when oil prices peaked and the Fed began accelerating its rate hikes to fight inflation. But we’re not chasing the rally. Why? We view market expectations for a dovish pivot as premature and that a pivot will come later as the Fed is now responding to pressure to tame inflation.