US inflation

Well that’s no good. Let your eye(s) drift to the various inflation measures, any and all of them inflecting (or more charitably, stabalising) to higher than desired levels. AUD took a hit, as will pretty much everything else, this morning.

Rate cuts off the table, for the near term, not just merely pushed out by a few months. “Pushing out” had been what the market was doing in response to the Jan and Feb CPI prints, which were hotter than expected, because of residual seasonality.

It is hard to keep saying it is “just seasonal” if month after month the strong data remains.

It seems clear the budget deficit (~6%, see lower left hand chart) and the money supply contraction (~2%, see second column, first row) are not sufficient to definitively bury inflation, and thus tighter conditions are required.

Some of that occurs more or less immediately, in that the US dollar rose, short and longer dated bonds sold off (yields higher), but the door to further hikes (something we’d very much thought was done) is now wedged open.

As a reminder, the multi-asset portfolios are well diversified, and whilst the correlation between “stuff” is going to go up on a day (or possibly a few days) like today, it simply (for the most part) means averaging down into cheaper units, and that’s fine for the medium and longer run.

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.