June CPI - My View

This release almost assures investors that the Fed will get started on reducing short-term interest rates in September. Is this a problem in the US from the point of monitoring the Fed's independence from the current administration? That will be a problematic conclusion that some will draw if this comes to pass. That said, CPI has been coming in quickly for a few months now, and the economy has been showing signs of potentially dslowing more rapidly than anyone expected. I would prefer no changes in policy from here into November, but if the central bank were trying to arrest economic decay rather than merely reacting to consumer level inflation that on an annual basis is still not close to reaching the Fed's 2% target. My fear is that inflation will continue to slow into August and then due to base effects if nothing else, re-ignite into the Autumn creating something of a stagflationary environment. I have written on this and spoke of this in the media. I am not talking about a 1970's style horrendous state of stagflation. Someone always wants to fight when I express these views. Nonetheless, this could make for an uncomfortable Q3 and Q4 of 2024 and early 2025. Whether it will be a mistake or not, I don't truly know, but all of this reinforces the probability of the Fed's move into a trajectory towards easier monetary policy as they continue to try to draw down their balance sheet. That means a weaker dollar, relative to reserve currency peers as the greenback had become overvalued in recent months. To me, that means, stay long the precious metals, stay long short-dated Treasuries (for now) that one may have used as cash equivalents, and be ready to respect trends when and if trends change. We are not at the end of the cycle; we are not even at the beginning of the cycle. This doesn't mean that AI / mega-cap tech is cooked. This doesn't mean that it's time yet to move a portion of one's equity exposure into bond proxies.