MARKET UPDATE | 9.13.23
It appears we will not break through current resistance and things will likely stay in current ranges – bond and treasury market is fairly flat
The economists were close on expectations to actuals.
Headline CPI at .6% was driven primarily by oil. So, in my opinion the market is going to dismiss this a bit. Even though the YoY went up to 3.7% from 3.3%, again, this is driven primarily by oil.
The CORE came in slightly higher than expected, but the YoY because it replaced a higher number (.6% last year) came down to 4.3%. CORE is what the Govt is watching because that strips out Food and Gas which they have limited control over. They want to see CORE at 2%. The reduction in August (September release) helps the overall narrative and moves the CORE down to low 4’s with a site on 3’s.
There was some further positive data in here. Used cars came down, shelter has started to show progress and moving lower, and other categories are showing gains. Shelter is a big issue still. This is a unique argument on how this gets solved. You need more inventory, and one argument is rates must come down to do this. The counter argument is if rates come down, it will not solve the inventory issue and home prices continue to jump.
I believe that we have weathered what was the 2nd riskiest report only due to the amount of energy increases after last month, which is a 0.0 we replaced.
Here is the Headline (top graph) and then Headline and CORE (bottom graph).
Next two months we have some big numbers of .4 and .5 to replace and I expect to see Headline back into the low 3’s and CORE into the high 3’s on a YoY basis in November when those reports come out. Avoiding a disaster today, which it appears we have done, is a positive as we should be at a lower starting point for the next few months to make meaningful headway.
However, we still need to job numbers to worse to see a meaningful change.
I would say at this point the Feds will pause. There is too much other choppy data to risk a material downturn by overdoing it and I think they will pause in next weeks meeting. There is really no need to adjust as that will not impact energy that moved from .1 to 5.6. Yes, .1 to 5.6 month over month with gasoline moving from .2 to 10.6. Yes, you are reading this right from a seasonal adjusted basis.
Shelter (rent and rent conversion from home ownership) moved down for first time in a very long time from .4 to .3. So, we are starting to see the gains here coming into the market which will help in future releases.
Below is the chart to look at all categories of where the increases came from. Attached is the full BLS CPI report that goes into further narrative and detail.
Josh Erskine
Chief Executive Officer
CalCon Mutual Mortgage LLC dba OneTrust Home Loans
Yellowstone RE Holdings LLC
Yellowstone Global Investments LLC