Week Ahead Strategy: CPI and FOMC Prep

CPI be critical with where we are in the cycle

Hey everyone,

We are back at another week in markets.

Let me zoom out for a moment and remind you where we are. On a longer-term basis, there are structural factors exerting downward pressure on growth. However, we are currently at a point in time where growth has accelerated marginally and remains resilient.

Within this context, we are nearing the end, if not at the end, of the FED hiking cycle. There is a little bit of a toss-up for an additional rate hike which is what you would expect to see at the end of hiking cycles.

In Nick Timiroas’s most recent article, he drew attention to the fact that FED governors are in agreement on holding interest rates at an elevated level but split on an additional hike. This type of disagreement among the FED is what you want to begin to see for a marginal shift to take place.

On a side note, it is always so interesting to me how some people pretend to have some “inside scoop” on the politics at the FED. Let me tell you something, unless you get FOMC decision information before it comes out, your “inside scoop” means nothing in markets.

This is actually part of the reason why it’s important to know how economic data gets priced into markets so that you can know how the market is weighing information. Check out this article I wrote on it:

This is another article I wrote on learning about economics. I plan to expand on in the future:

Let’s get into this week (see last week’s article here: link)!

As you know, the market is currently pricing a 41% probability of a hike in November. We already have a reasonable idea that there will be a pause in September so everyone is focused on November.

This is why the CPI print is so important this week. This is what connects to the trade I mentioned previously:

Let’s expand on this a little