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Inflation Decelerates – Jobs Disappear – Rates Stable – FED Asleep

A positive day with the Dow Jones up 176 points (+0.53%) and the Nasdaq up 21 point (+0.21%)

About a week ago we commented on the used car “bubble” prices collapsing. If you recall, this metric represents a rather large chunk of the FED’s inflationary index. 

Now, rents are hitting the skids. Fed’s New Inflation Index Shows Rent Slowing Sharply, Setting Stage For Fed Pivot

There are two things that need to happen for the Fed to stop hiking and pivot (or just one if the Fed were to raise its inflation target, which will happen but not for several years as Powell himself admitted last week): first, the labor market has to turn decidedly weaker with both the pace of monthly payrolls increase and hourly earnings having to come down drastically; and second, inflation has to drop sharply on a Y/Y basis and has to at worst flatten sequentially.

Regarding the first, we are almost there. Recall that as we first reported last week, the Philly Fed had effectively revised what was according to the BLS a gain of 1.1 million jobs to just 10,500 jobs, meaning that the Fed was looking at erroneously overstated, arguably politicized data, as it unleashed its burst of 75bps rate hikes in June… which happened just as June jobs number turned negative.

“For the better part of his presidency, while the American economy has struggled and record inflation has brought historic pain to families and small businesses across the country, President Joe Biden has consistently bragged about job growth”, Scott wrote adding that “now, thanks to the good work of analysts at the Federal Reserve Bank of Philadelphia, we know that the BLS inaccurately reported the creation more than one million jobs, and that much of what President Biden has claimed credit for as the economic achievements for his administration is a lie.”

In other words, most important/large inflationary metrics are decelerating if not outright reversing in a major way. Jobs creation numbers are fake. There aren’t any and mass corporate layoffs are just starting. The short end of the yield curve is stable and the FED is right on top of it.

Yet, we are expected to believe they will continue to hike interest rates? 

Give me a break. The stock market might be sniffing this out as well. 

Trying to make money based on what the FED does or doesn’t do is incredibly hard. Our mathematical and timing work is not. It clearly shows what the stock market will do in both price and time over the next few months. If you would like to see, please Click Here.