We get the consumer price index (CPI) in 30 minutes and markets are fully expecting a number that meets the forecast or is even below forecast. The forecast is for a CPI of 6.5% and a core rate of 5.7%. Almost with doubt if the CPI comes in hot we will see bloody markets.
The 10 year treasury is at 3.55% this morning which is pretty much flat to yesterdays close with equity futures up a tiny amount. These will likely make huge moves premarket after CPI.
Yesterday was the 6th green day in a row for income issues–a person could get used to this, but probably shouldn’t. No buying or selling yesterday, but today may well nibble on an addition to my CHS holdings–I have a small holding in their preferreds so would be adding to a current position.
So let’s go–on to CPI.
14 thoughts on “Day of Reckoning is Here”
“My 40 plus years of experience in finance strongly recommends that investors should look at what the market says over what the Fed says,” — Jeffrey Gundlach, DoubleLine Capital, January 11.
+1 for Gundlach
I’m no expert, but for the last few weeks, the bar graphs on long CD rates have been singing me a song that I don’t hear playin on The Fed album.
Agreed. Last month I was kicking myself for buying a Wells Fargo 4.85% 2 yr. CD from Schwab thought I had jumped the gun. Not so, haven’t seen anything that high on Schwab since then regardless of FED rate increases.
Got some of that one as well Bill S. I am most happy to lock in that rate (and actually some as high as 4.95%).
SaveBetter/Raisin is still offering Sallie Mae’s 27 month CD at 5%, however Save Better is also saying account access will go dark for some days near the end of January (???) so maybe Save Better is not really a viable choice for a place to have CDs ?
Oh come on, how long can it take them to abscond to a non-extradition, tropical country with suitcases of cash- a couple of days tops. Then account access will be restored, no problem.
Bear, About a month ago I bought a small amount of a 5.375% 12 year CD callable in a year. At this pace I wouldnt be surprised to see it not last past one year..
Grid–I have a 4.95% callable CD–not really familiar with the ins and outs of these instruments, but hoping JPM will leave me alone for a while.
You would think with all the constant issuance for new money they have to do that they wouldn’t be bothering much to call in CDs months after issuance…. In the grand scheme of things for our spendaway Govt, always looking for more, what difference would it make?
You never know. I know a guy who bought a 12/17/2027 6% FHLB note and it was called for redemption this week. He said he owned it 18 days before they sent the notice. Aint that sumpin!
If Gundlach’s quote was true, then why was the market at record highs in Dec. 2021? Seems to me that the Fed began acting too late, and the market was very wrong, so I see no reason to praise the market gurus over the carnage of 2022. I personally don’t see any reason to party with a YOY inflation rate of 6.5% when the Fed target rate is 2%, earnings are generally in decline, and the world is running on debt. However, I admit to being a pessimist, so I’m about 60% invested in preferreds, bonds, CEFs, and some stocks and 40% in money market yielding 4.2%. I’m not seeing very many good reasons to abandon the 4.2% MM funds, but I keep looking.
Given the drop I was seeing on the long end of rates, I thought those 4.2% Money Market rates could start to fade later this year. In December, I locked in a years worth of income with a 4.3% to 4.8% ladder, on what would otherwise be a portion of my MM account. I’ll see what happens when I roll, but I am happy with the decision now.
I also have some short-term CDs and treasuries in the 4.3% range, but the Fed Chair has repeatedly said that his goal is to drop inflation to 2%, and it isn’t even close. The 4.2% MM rates are not going away, and they will likely rise next month after the Fed’s next rate increase. At this time, the pivot is just a wall street fairy tale. When I see Gundlach and others, I envision them with a long furry nose, pointy ears, and looking entirely unlike the Grandmothers that I loved and trusted.
I also have a large allocation in MM funds. Market is saying fed is wrong but what if fed is right. Lower inflation is not enough as JP has remarked the goal is to kill it. A shock to the market would be an understatement.
I think we are still going to see a rate increase from the Fed’s. I am guessing 25 basis points