On a related note…
In the Teaser Rates video we released last week, we hit discuss the risk of chasing short-term rates with long-term funds. This trend is, in part, driven by behavioral biases. #recencybias #overconfidence #FOMO
The Fed’s Preferred Measure
The Consumer Price Index or CPI gets the bulk of the attention, but anyone reading the financial press knows that the Federal Reserve prefers to focus on a different measure: the Personal Consumption Expenditures (PCE) price index. We’ll spare you the minutia as this month’s PCE, excluding the bothersome food and energy effects, posted a slight increase, largely in line with expectations. While the year’s inflation remains high, the underlying trends point to inflation heading towards the Fed’s 2% target. One metric getting more attention of late is a look at the most recent six-month trend (and annualizing it), which shows inflation tracking towards a 1.9% annual rate.
Whether the inflation news adds fuel to the official start of the “Santa Clause Rally” remains an open question. Santa has delivered quite nicely thus far. Markets will likely continue to aggressively pencil in more rate cuts for 2024, but we shall see how hard (if at all) the Fed pushes back.
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