Tuesday, April 13, 2021

Morning Note: Beware your predictions...

While inflation (CPI) came in a bit hotter, month-on-month, than economists expected, based on the reaction (lack thereof) in rates (actually dropped a bit), the street feared worse. 

Given the price trends across the commodities/manufacturing inputs space, fearing worse makes sense. And, given the typical lag in wholesale price pass-through to consumers, and the avalanche of stimulus yet on the horizon, higher inflation prints are highly likely in the months to come.

The NFIB Small Business Survey (3 of its components are featured in our own macro index) for March was released this morning. The following from NFIB's chief economist jibes with our recent commentary on the labor market.

“Main Street is doing better as state and local restrictions are eased, but finding qualified labor is a critical issue for small businesses nationwide. Small business owners are competing with the pandemic and increased unemployment benefits that are keeping some workers out of the labor force. However, owners remain determined to hire workers and grow their business.”

If owners' determination results in offering up higher wages to entice folks off of the sidelines, that will in all likelihood add yet more fuel to the inflation fire...


Asian equities were mixed overnight, with 7 of the 16 markets we track closing lower.

Europe's struggling as the morning wears on, with 12 of the 19 bourses we follow in the red, as I type.

U.S. major averages are mixed to start the day: Dow down 139 points (0.41%), SP500 up 0.08%, SP500 Equal Weight down 0.33%, Nasdaq 100 up 0.85%, Nasdaq Comp up 0.73%, Russell 2000 down 0.39%.

The VIX (SP500 implied volatility) is up 0.24%. VXN (Nasdaq 100 i.v.) is down 1.33%.

Oil futures are up 0.89%, gold's up 0.50%, silver's up 1.91%, copper futures are up 0.20% and the ag complex is up 0.81%.

The 10-year treasury is up (yield down) and the dollar is down 0.15%.

Led by silver, gold miners, ag commodities, utilities and base metals -- but dragged by MP (rare earth miner), banks, AT&T, uranium miners and oil services -- our core mix is up 0.15 to start the session. 

Think of the following from Tetlock and Gardner's enlightening and instructive book, Superforecasting, as a teaser for this week's main message, due tomorrow:

"...it is generally true that the further we try to look into the future, the harder it is to see. But there can be prolonged exceptions to the rule. Predicting the continuation of a long bull market in stocks can prove profitable for many years—until it suddenly proves to be your undoing."

Have a great day!

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