Markets are pricing 4-5 Fed hikes but leading inflation indicators say that's overkill.
Delphi's leading inflation index has been flashing easing since April and typically runs 9 months ahead of global CPI. The gap between what's priced and what's likely is now flagging a potential policy error.
Macro Regime model went neutral in November and just shifted cautious. Weaker liquidity + aggressive hike expectations are the culprits.
Growth is still holding the line. Consumers spending, credit spreads tight, risk assets digesting higher 10Y yields without breaking. Neutral regimes historically deliver positive returns but with choppier downside than full risk-on.
Next few CPI prints are the decider. Hotter data pushes the model toward risk-off. Softer data pulls hikes out of the curve.
Leading indicators say the Fed has less work to do than the market thinks. Watch the data.
Delphi's leading inflation index has been flashing easing since April and typically runs 9 months ahead of global CPI. The gap between what's priced and what's likely is now flagging a potential policy error.
Macro Regime model went neutral in November and just shifted cautious. Weaker liquidity + aggressive hike expectations are the culprits.
Growth is still holding the line. Consumers spending, credit spreads tight, risk assets digesting higher 10Y yields without breaking. Neutral regimes historically deliver positive returns but with choppier downside than full risk-on.
Next few CPI prints are the decider. Hotter data pushes the model toward risk-off. Softer data pulls hikes out of the curve.
Leading indicators say the Fed has less work to do than the market thinks. Watch the data.