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Checking In On The Economy And Markets

Sharing some thoughts on credit spreads and home prices

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(Not intended to be investment advice, opinions are my own.)

Big day of economic news this past Wednesday. CPI (which inflation is based on) finally eased after a string of higher readings the past few months that were making stock and bond markets pretty nervous.

Eased might be too strong of a word though as you can clearly see that annualized core inflation (the blue line) ticked down slightly in December while overall inflation (the red line) still climbed.

YoY change in CPI and Core CPI (Source: Federal Reserve Bank of St. Louis)

Markets were heartened by the news though because the Fed primarily watches changes in core CPI (the blue line, which takes out volatile components like food and energy) so any time it goes down, even a little bit, that increases the expectation of easier monetary policy in the short to medium-term future.

Still, it’s been a slow start to the year for financial markets. Stocks and bonds continued to be correlated, similar to how they were back in 2022 when inflation fears dominated. As long as inflation remains a concern and the Fed tilts towards being hawkish…

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Alpha Beta Blog
Alpha Beta Blog

Published in Alpha Beta Blog

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Tony Yiu
Tony Yiu

Written by Tony Yiu

Data scientist. Founder Alpha Beta Blog. Doing my best to explain the complex in plain English. Support my writing: https://tonester524.medium.com/membership

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