Inflation reports are expected to show improvement with a caveat. The caveat is that improvement means nothing and the reports measure something that already happened. Oil prices fell in June. June ended two weeks ago. You're reading about it now because someone needed to fill space between pharmaceutical ads.
Warsh heads to Capitol Hill. Kevin Warsh. Former Federal Reserve governor. The guy who wants to be Fed chair so badly he's been auditioning since 2010. He's testifying about something. Probably inflation. Probably saying words that sound important. Capitol Hill loves when former officials show up to confirm what everyone already decided.
Tumbling oil prices are welcome good news for inflation unless you're a technical analyst who knows oil prices bounce around like a drunk on a trampoline. Draw a trendline on crude and it laughs at you. Draw support and resistance and it breaks both in the same afternoon. But sure, retail traders will see this headline and think they've cracked the code. They'll buy calls on consumer discretionary stocks because lower gas prices mean more spending money. They'll ignore that gas was expensive last month when they were supposed to buy and cheap this month when they're about to.
The improvement comes with a caveat. The caveat is always the same. The data is backward-looking. The trend might reverse. The methodology changed. The seasonal adjustment assumed something that didn't happen. Pick your caveat. They're interchangeable. What matters is you read the headline and felt something. Hope maybe. Relief. The kind of emotion that makes you check your brokerage account and wonder if now is the time to buy.
It's not. It never is. Warsh could tell you that but he's too busy rehearsing his pivot-hawkish talking points for senators who stopped listening after he said his name.
Photo by Markus Spiske on Unsplash
Leave a Comment