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Marble Surface

Current Insights

After several quarters of declines, Q3 earnings beat expectations quite handily, given low expectations, and knocked us out of the earnings recession we’ve been in. 

Inflation has fallen by 2.5 percent, more than 1.8 million jobs have been created in the past six months, and the S&P 500 has had one of its best starts in 25 years.

The May reports showed signs of continued economic growth. More jobs than expected were added in May, and the labor market recovery remained strong. That said, two indicators we track in this piece, the yield curve and consumer confidence, remained in red during the month, and service sector confidence remained in yellow.

After a tough December, the markets rallied in January. Fears about inflation faded, and hopes that the Fed would hike rates more slowly—or even start cutting them—dominated markets as signs of economic weakness appeared. But this bad economic news was good news, as long-term rates pulled back, supporting financial markets.

Let’s start with inflation, specifically, the Producer Price Index (PPI) inflation figures and the University of Michigan inflation expectations, both of which came out this morning. The details don’t really matter—what matters is the big picture. The PPI dropped significantly on a year-over-year basis but came in high on a month-to-month basis. Similarly, the Michigan inflation expectations number dropped significantly for the next year but remained unchanged for the next five. So, is this good news or bad news?

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