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Cool CPI Print Validates Our View That Inflation To Cool in Q2

Cool CPI Print Validates Our View That Inflation To Cool in Q2

New York, NY, InfraCap Market Update - CPI headline printed cool on headline at .3% vs. expectations of .4% and core came in line at .3%.  Volatile components such as used auto prices and airfares were down 1.4% and .8% respectively.  Retail gasoline prices were up 2.7% but are likely to fall over the next couple of months as declines in wholesale prices flow through to retail prices.  Also, retail sales printed cool at zero percent vs. expectations of .4% and the control group which is reflected in GDP was down .3%.  The combination of a slightly light CPI print and weak retail sales caused the bond market to rally by over 1% and stocks to rally up .5%. 


We forecast that inflation will continue to cool in the second quarter as lower energy prices feed into both headline and core inflation and estimate a 50% chance of a July rate cut and 50% chance of a September cut.  A July cut is dependent on the labor market continuing to decelerate which is difficult to forecast as short-term labor reports are difficult to project.  We continue to believe that our 5,750 target on the S&P will prove to be conservative as global rate cuts and AI propel global stock and bond markets higher after global cuts commence with the ECB to act in early June.



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