Syz the moment

As the Federal Reserve looks likely to make only modest cuts to benchmark interest rates. Source: FT

Source: Nautilus Research

His view: "While everyone is worried about 3.5% inflation, the real issue is the ongoing 8% per annum debasement of currency, on top of inflation. Your hurdle rate to break even is around 12%, which is the 10-year average returns of the S&P 500...just to keep your purchasing power". Key takeaway: if you want to protect your purchasing power in a global monetary debasement, you have 3 choices: 1/ spend; 2/ invest into risk assets; 3/ invest into store of values

This is the first time that markets are pricing-in LESS rate cuts than Fed guidance. Just 4 months ago, markets saw 6-8 rate cuts in 2024 with cuts beginning in March. Odds of a rate cut in June are down from ~60% before the CPI report to ~22% now. Source: The Kobeissi Letter, www.zerohedge.com

“.. The 3-month annualized change in supercore inflation is now over 8% and accelerating .. the Fed is not done fighting inflation and rates will stay higher for longer. .. We are sticking to our view that the Fed will not cut rates in 2024.” [Slok] CPI Source: Carl Quintanilla

-> The Headline CPI for March came in at +0.4% above expectations of +0.3% month-over-month. On a YoY basis, Headline CPI increased 3.5% vs. 3.4% expected and 3.2% in February. This follows January and February being hotter readings than expected. This is the highest headline CPI reading since last September. -> The core CPI (ex-food and energy) also came in above estimates: +0.4% MoM (vs. +0.3% estimates) and 3.8% yoy vs. 3.7% expected and 3.76% in February. This is the first uptick in core inflation since March 2023. Transportation prices are up +10.7% yoy; Shelter is up +5.7% yoy -> Even the "Supercore services" index which FED policymakers have been emphasizing, which strips out housing, ROSE +0.65% on the month, continuing the trend of higher prints. It is up 4.77% yoy, a 11 months high... -> The fed and Powell are not going to like it. This number might decrease rate cuts expectations even more (they have gone from 7 to less than 3 in just a few months). Could we see 0 rate cuts in 2024? Markets don't like it either as S&P 500 futures decreased 90 points in a matter of minutes. The US 10-year Treasury yield ip up +12 basis points to 4.49%. The 2-year is up +17 basis points to 4.91%...

Here is how to do the math 👇 Is copper not that scarce after all? Source: Visual Capitalist thru IVANA SPEAR

Going forward, with US Treasuries expected to be a poor diversifier due to supply overhang and sticky inflation, gold might prove to be even more useful within multi-assets portfolios.