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More Hints of Economic Decline; June 1 Default Deadline Approaches

user profile picture davefairtex May 14, 2023
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Two economic reports, and a Balance Sheet:

Producer Price Index (PPIACO): +0.08% m/m, -3.08% y/y.  Deflationary.
Consumer Price Index (CPIAUCSL): +0.37% m/m, +4.72% y/y.  Inflationary.
Fed Balance Sheet (WALCL): -0.01% w/w, -5.16% y/y.  Neutral.

I believe that the drop in PPI y/y is explained by oil’s $45 plunge over the past 12 months.  Check out how (relatively) well correlated the PPI is with crude.  It is not lock-step in terms of magnitude, but it sure is well correlated directionally.

CPI inflation remains hot, even though CPI has been repeatedly “adjusted” over the decades to remove as much inflation as possible.  Call the CPI: “systemic BLS inflation misinformation.”  Where’s Janky when you need her?

Rate moves appear to have calmed down this week; all yields inched higher, with the 1-month yield in the lead.   The CME Fedwatch Tool suggests there is just a 15% chance of a 25 bp rate increase at the June 14th meeting, one month from now.  That part smells like “a pause”, but the short-term Treasury yields are suggesting we have more rate increases ahead.

The Banking Pandemic continues apace.  There was even a youtuber who specifically mentioned a very similar phrase: “Are Bank Failures Creating A Fear Pandemic?” (Source – YT).  Warren Buffet weighed in: “Fear is contagious,” he said, adding that “you can’t run an economy” when people worry if their money is safe in banks (Source – Pfizer/Reuters).  I re-sorted my Big Bank List, this time ordering symbols by %change y/y rather than %change w/w.  Looks like we may have some more failures queuing up.

This week, the buck shot higher, with DX rising 1.51 (+1.50%) to 102.51, ending the week above both the 9 and 50 MA lines.  Most of the move happened on Thursday and Friday.  The candle model saw this swing-low-like pattern as very bullish, and the trend model now has the buck in a gentle uptrend.  For those concerned about imminent de-dollarization, CNY/USD rose by +0.69%, which is the wrong direction for the “dollar-to-confetti-tomorrow” outcome.  Also: EUR -1.58%, GBP -1.57%, AUD -1.57%.  The EUR/USD is now in a (weekly) downtrend.

Given this week’s strong dollar rally, gold’s small drop (-5.00 or -0.25%) to 2019.80 was actually a positive outcome. As an example of this, gold/Euros rallied 24.39 (+1.33%).  Gold’s biggest decline (in USD) happened on Thursday (-$16) following the CPI report.  Even so, the trend model still has gold in a gentle downtrend in the daily/weekly…

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Market Update
Well done Dave as usual
Anonymous Author by andys61
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