Perspective on CPI Growth, Bull Runs, and a Reminder that Everything is Relative
May 14, 2021 | FIRESIDE CHARTS
Activity—and prices—are on the rise in the industries most battered by the pandemic, and it helped propel overall CPI growth far past expectations in April. Everything is relative though; core CPI is only marginally above its pre-pandemic trendline and not enough to raise eyebrows when viewed as a long-term average. Equities rallied yesterday after a few days of steep selloffs—will the S&P 500® Index continue to mirror a past bull run? Meanwhile, crypto also saw some significant losses this week, though its 2020-’21 run has been extraordinary. But was it too extraordinary? And commodities inched back toward Earth on increased talk of rising rates and a downshift from central banks, but once again everything is relative—just ask anyone looking to buy lumber.
1. The Covid bifurcation in the economy is ending as we fully open up. After over a year of closure, they can and are raising prices. The labor shortage is not helping…
Source: Pantheon Macroeconomics, from 5/13/21
2. It seems that fears are turning into a reality. While current levels of CPI are still in the realm of normal to even low, it is the trend driven by the economic surge that is worrisome to many.
Source: The Daily Shot, from 5/13/21
3. Before everyone panics, let’s put inflation in the Fed’s perspective. A little overshoot for a little while will not hurt the economy:
Source: The Daily Shot, from 5/13/21
4. Ever-widening deficits aside, what will happen to inflation if Congress adds another ~$4 trillion in stimulus?
Source: The Daily Shot, from 5/13/21
5. Human behavior can create incredibly similar patterns. Are we just starting a consolidation phase?
Source: LPL Research, FactSet, from 5/12/2021
6. A weak excuse. Crypto is not a currency. If you buy a Tesla for two bitcoins on Monday, and by Wednesday’s settlement it’s gone down 20%, the seller is rather disappointed to say the least!
Source: CNBC, from 5/13/21
7. My last “OK, Boomer”. Does this not look like a bubble?
Source: CoinDesk; Federal Reserve of St. Louis, from 5/13/21
8. Just the thought of inflation rising too fast and possibly causing central banks to taper/raise rates had an immediate effect on over-heated commodities:
Source: The Daily Shot, from 5/13/21
9. ~600% lumber inflation put into terms we all can understand:
Source: The Daily Shot, from 5/13/21
10. A double bottom in the dollar?
Source: The Daily Shot, from 5/13/21
11. Great news for Europe!
Source: Morgan Stanley Research, as of 5/4/21
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.