US inflation

The inflation data sure looked good.

0.2% (month-on-month prints) as far as the eye can see.

However, wages are still strong, and energy prices have been moving higher. That 10s lifted overnight is a worry. Higher for longer, in the US, seems a bit more likely, as the market’s baseline expectation.

Our long-running view, the US can handle higher rates. More favorable stuff going for it. Demographics that support housing. Fiscal support in IRA/CHIPS seems to be spilling over. 30yr FRMs, and locked in low rates for corporates/households.

Europe, Aus, NZ, Canada, has none (well, fewer) of those things. Europe’s long-running structural issues (no “true” banking/fiscal/monetary/labor/political integration, due to frictions) Aus, NZ, Canada due to h/h leverage, overvalued assets, and vulnerability to rate resets.

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