Good Morning Team,

1. The Close Matters More Than The Open – The market is kind of like a big game of tug-of-war between the bulls and the bears on any timeframe you want (intraday, daily, weekly, monthly, quarterly, or annually). From where I sit, the close matters more than the open. Why? Because that shows me who won during that timeframe. In bull markets, it is normal to see the market open lower and close higher (which is what happened yesterday). In bear markets, stocks tend to open higher and close lower. Stocks opened lower on Thursday after the consumer price index (CPI) came in stronger than expected. Higher inflation reduces the chance that the Fed will slash rates and much of the rally we have seen since November was based on the notion that the Fed will slash rates in 2024. The Fed can only cut rates if inflation falls. That said, the yield on the 10-year fell yesterday and stocks closed higher which are both bullish signs for the market. The market is still pricing in several rate cuts from the Fed this year – see below
2. A Closer Look At Inflation – December CPI inflation rate rose to 3.4%, above expectations of 3.2%. Core CPI inflation fell to 3.9%, above expectations of 3.8%. That was the 33rd consecutive month with inflation above 3% and the first jump since September 2023.
   More Disinflation Is Needed: 
   
   
   
   
   
   
3. More On The Inflation Front –Here are a few posts that caught my attention…
   While CPI inflation is at 3.4%, inflation is much higher in many basic necessities:1. Car Insurance Inflation: 20.3%
   2. Transportation Inflation: 10.1%
   3. Car Repair Inflation: 7.1%
   4. Rent Inflation: 6.5%
   5. Homeowner Inflation: 6.3%
   6. Hospital Services Inflation: 5.5%
   7. Food Away From Home Inflation: 5.2%Both Core CPI and headline CPI came in hotter than expectations. This is the first time since February 2023 that both readings were higher than expected. For the first time since September 2023, CPI inflation is back on the RISE. Affordability is still getting worse.

   Increases over last 3 years…
   CPI Medical Care: +6.4%
   CPI Apparel: +10.0%
   US Wages: +14.5%
   CPI Shelter: +18.9%
   CPI New Cars: +19.6%
   CPI Food at home: +20.7%
   CPI Food away from home: +20.8%
   Actual Rents: +21.1%
   CPI Used Cars: +24.2%
   CPI Electricity: +25.8%
   CPI Gas Utilities: +27.6%
   CPI Transportation: +30.7%
   Actual Home Prices: +36.2%
   CPI Gasoline: +45.5%
   CPI Fuel Oil: +53.9%

4. Sell The News? Bitcoin ETF – The SEC approved several Bitcoin ETFs. Gold soared after the Gold ETF (GLD) was approved. Many people expect Bitcoin to follow suit. Bitcoin  just  had  a huge  run.  It  can  easily pullback.
5. Global Elections: Nearly half of the world’s people and money are involved in elections during 2024. Some people are calling this the “age of polycrisis.” In the US, Trump has a big lead and will likely face off with Joe Biden. Biden has to with rising inflation and lousy wage growth. Once Trump clears up his legal issues he will start campaigning and will likely win because he wants to make America great(er) again. Elsewhere, Russia, the UK, and India are also getting ready for elections, and so are newer democracies like Pakistan and Tunisia. Here’s a map showing some key elections to watch this year. Taiwan has elections this weekend. 
   
   

I’ll have the weekend report out soon.

Have a great day,

Adam