What we’re reading (11/15)
“US Stocks Close Higher As Investors Cheer Fresh Data Showing Inflation Is Easing” (Business Insider). “US stocks closed higher on Wednesday, extending gains from Tuesday's sharp rally after fresh data showed a continued decline in inflation. The Producer Price Index fell 0.5% in October from the prior month, representing the largest decline since April 2020 and a sharp reversal from the 0.4% gain seen in September. On an annual basis, the PPI rose 1.3%, down from 2.2% in September. The reading follows Tuesday's Consumer Price Index report, which showed prices paid by consumers rose less than expected last month.”
“The Elusive Soft Landing Is Coming Into View” (Wall Street Journal). “Six months ago, the consensus among economists surveyed by The Wall Street Journal was that the economy would enter a recession over the next 12 months. In October’s survey, the average forecast of economists was for no recession. After Tuesday, the probability appears to have dropped further. That, at least, seems to be the verdict of investors who sent stocks up sharply and Treasury bond yields down on news that inflation was surprisingly docile in October. If they are right, it would be highly unusual. In the past 80 years, the Federal Reserve has never managed to bring inflation down substantially without sparking a recession.”
“The Inflation Rally Goes Global” (DealBook). “Market optimists have moved up their bets on rate cuts. Futures markets this morning pointed to the Fed starting to lower borrowing costs by May, sooner than previous estimates of closer to the end of 2024. Less aggressive is Mohit Kumar, the chief financial economist at Jefferies, who wrote today that big rate cuts would begin after the presidential election next year. Jefferies predicts the Fed’s prime lending rate going to 3 percent by the end of 2025 from its current level of 5.25 to 5.5 percent.”
“The Market Thinks The Fed Is Going To Start Cutting Rates Aggressively. Investors Could Be In For A Letdown” (CNBC). “While Fed officials haven’t indicated how many months in a row it will take of easing inflation data to reach that conclusion, 12-month core CPI has fallen each month since April. The Fed prefers core inflation measures as a better gauge of long-run inflation trends. Traders appear to have more certainty than Fed officials at this point. Futures pricing Wednesday indicated no chance of additional hikes this cycle and the first quarter percentage point cut coming in May, followed by another in July, and likely two more before the end of 2024, according to the CME Group’s gauge of pricing in the fed funds futures market.”
“The Rise And Fall Of The World’s Most Successful Joint Venture” (New York Times). “No one uses words like symbiotic today. In Washington, two political parties that agree on almost nothing are united in their depictions of China as a geopolitical rival and a mortal threat to middle-class security. In Beijing, leaders accuse the United States of plotting to deny China’s rightful place as a superpower. As each country seeks to diminish its dependence on the other, businesses worldwide are adapting their supply chains.”
