The Coming Collapse of Inflation and How To Benefit From It
@ankitapathak_ and I wrote a note on why red hot inflation is likely to cool.
Read this intro thread 🧵with the link to full report.
@ankitapathak_ and I wrote a note on why red hot inflation is likely to cool.
Read this intro thread 🧵with the link to full report.
What Are We Saying?
1. Biggest driver of inflation – commodity prices – are falling. US Housing, the core inflationary component is red hot. This is likely to cool off and mean revert.
1. Biggest driver of inflation – commodity prices – are falling. US Housing, the core inflationary component is red hot. This is likely to cool off and mean revert.
2. Market based indicators like ‘Yield Curve Inversion’ and trajectory of rates indicate a slowdown ahead and hence a drag on prices.
3. India inflation which was driven by food & fuel is peaking and is likely to fall.
3. India inflation which was driven by food & fuel is peaking and is likely to fall.
4. A combination of weakening demand, improving supplies, a mean reversion in commodity prices and ‘Base Effects’ are likely to cause inflation to peak in the rest of 2022.
5. What will benefit: Duration plays in bonds, commodity users like auto, cements and consumption. Banking will do well as disposable incomes rise and demand for credit strengthens further.
Here is the link to report with data/charts and the hypothesis: dspim.com
Here is the link to report with data/charts and the hypothesis: dspim.com
Detailed thread
The report - The Coming Collapse of Inflation and How To Benefit From It - spoke about this trend.
And now data has begun to confirm the hypothesis:
US CPI YOY ACTUAL 8.5% (FORECAST 8.7%, PREVIOUS 9.1%)
And now data has begun to confirm the hypothesis:
US CPI YOY ACTUAL 8.5% (FORECAST 8.7%, PREVIOUS 9.1%)
More evidence.
US Housing starts plunge to 18 month low. At precovid levels.
Inflation Hawks beware.
US Housing starts plunge to 18 month low. At precovid levels.
Inflation Hawks beware.
More evidence
US New home sales fall 29% yoy. Now down 50% from 2020 highs
US New home sales fall 29% yoy. Now down 50% from 2020 highs
US CPI is now at 8.3% yoy vs peak of 9.5% in Jul'22.
It's decelerating at an expected pace.
It's decelerating at an expected pace.
The biggest driver of inflation in US (along with energy and soft commodities) has finally rolled over.
Rents fall nationally for first time in 9 months therealdeal.com
Rents fall nationally for first time in 9 months therealdeal.com
Inflation drivers in US
1. Agri commodities, decelrated, reducing
2. Energy prices, slight reduction, still very high
3. Car market (in a recession now)
4. US housing (peaked, ripe for an accelrated decline)
5. Services inflation (peaking, likely turn by Dec'22)
1. Agri commodities, decelrated, reducing
2. Energy prices, slight reduction, still very high
3. Car market (in a recession now)
4. US housing (peaked, ripe for an accelrated decline)
5. Services inflation (peaking, likely turn by Dec'22)
German PPI donw 4% mom.
FAO food Index about to turn negative next month.
The coming decelration in global price indices will be eye watering. Energy prices are probably ripe for a decline as well.
FAO food Index about to turn negative next month.
The coming decelration in global price indices will be eye watering. Energy prices are probably ripe for a decline as well.
Adding this thread here for reference:
US CPI now 200bps below peak. Downward momentum gaining strength
Went through the numbers. CPI Shelter and US housing inflation peaked in yesterday's data release. A high probability that we see deceleration ahead. 👀
Keep watching. Data is 🔑
Keep watching. Data is 🔑
Fed's favourite inflation gauge the Core PCE is now just 20bps higher than Fed Funds upper bound.
US manufacturing was already in recession. Services has also flipped over. A quicker inflation crack is coming. Faster than even my expectation. Jan to Mar, one of the months will see a 100bps decline
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