The Fed officially made their 3rd interest rate cut of 2024 for 25 basis points. This marks a total of 100 basis points of rate cuts in 2024 as inflation reaccelerates. With all key metrics of inflation nearing or above 3%, a new question arises.
Are rate hikes coming back? https://x.com/KobeissiLetter/status/1869829154272919597
Apollo makes the case that the economy is strong and growth has been robust. Over the past 2 quarters, US GDP growth has been 3.0% and 2.8%. The Atlanta Fed expects GDP growth in the fourth quarter to be 3.2%, well above the CBO’s 2% estimate of long-run US growth. https://x.com/KobeissiLetter/status/1869829156986597486
Apollo notes that the strong economy, combined with the potential for lower taxes, higher tariffs, and restrictions on immigration, could spark inflation. PCE inflation could rise by over 140 basis points due to tariffs, according to Deutsche Bank. Higher prices are coming. https://x.com/KobeissiLetter/status/1869829159670952414
Recent data shows that inflation is already heading higher again. 3-month annualized core CPI inflation is now back up to an alarming 4%. 6-month annualized core CPI fell to 2.5% before rebounding back toward 3% now. This is BEFORE tariffs and tax cuts are imposed. https://x.com/KobeissiLetter/status/1869829162082677010
PCE inflation, the Fed's preferred inflation measure, is trending sharply higher. 1-month annualized core PCE inflation is now at 3.5%+. 1-month, 3-month, and 6-month annualized core PCE inflation are ALL back on the rise here. Tomorrow's data will show November's numbers. https://x.com/KobeissiLetter/status/1869829164599259622
Meanwhile, bond markets are trading like rate hikes already started. In what Fed Chair Powell has called normal market "fluctuations," something does not add up. The 10-year note yield is now up ~90 basis points since rate cuts began in September. Markets are not convinced. https://x.com/KobeissiLetter/status/1869829167044542518
The S&P 500's 10-day advance/decline line is now at its most oversold level in at least the last year. 13 straight days of negative breadth will do that.
..looks like the US averts recession for now
> US leading economic indicator perked up +0.3% m-o-m after falling the past two months
> Q3 q-o-q GSP +3.1% vs 2.8% est and 3% previous
> Q3 PCE Prices +1.5% vs 1.5% est
