Breakouts and Shakeouts; a Gameplan | Morning Express


Yesterday’s inflation data was everything we anticipated. Not because we called for a hot read, but because the bond market is pricing in peak inflation. Core CPI for May was +3.8% YoY and +0.7% MoM, handily topping expectations. However, transitory factors such as the price of used cars and airfares are significantly impacting the rise. In fact, more than half the rise from April to May can be attributed to used cars and trucks, new vehicles, and airfares. Although there is still room for airfares to reach pre-pandemic levels, it is our belief they cannot continue to carry the rise in inflation from month to month at this pace and the bond market agrees with us. The yield of the U.S. 10-year reached a low of 1.428% overnight, the lowest since March 3rd, but one component is holding markets ba