The latest consumer price index numbers came out for December. The CPI was up 0.4% for the month, while the year-over-year now stands at 2.9%.
The median CPI was up 0.3% for the month, with the year-over-year median CPI at 3.8%.
But that’s not the end of the story. The financial media and investors celebrated because the “core” CPI is improving. From this CNBC article:
“Economists prefer looking at a measure known as ‘core’ CPI, which strips out volatile food and energy prices, for a more accurate reading of underlying inflationary dynamics. There, the picture is better: Core CPI fell to 0.2% on a monthly basis in December, after having been stuck at 0.3% a month since August. The annual core inflation rate fell to 3.2% from 3.3%.”
So, if you don’t eat and don’t use energy, then things are improving. Except, even using core inflation, it is still well above the Fed’s target of 2% price inflation.
On this supposedly good news, stocks soared higher. The Dow was up over 700 points. The Nasdaq rose over 400 points. Bitcoin went back above $100,000. Even gold had a good day for investors.
This is almost nonsensical. I think the only reason stocks soared higher is because they had been beaten down a bit recently. Maybe this would have happened without any inflation report. It’s just one of those things that we can’t know. But logically speaking, this really shouldn’t have been great news for the markets.
Still a Recession
It doesn’t really matter that much what price inflation does at this point. It matters temporarily for how much we have to spend as consumers. But for the markets and the economy as a whole, it won’t impact whether or not we get a recession.
The recession is baked into the cake. It is a done deal unless the Fed wants to go the hyperinflation route.
The yield curve is starting to normalize after being inverted for nearly 2 years. The Fed’s balance sheet is down over $2 trillion from its ridiculous peak in 2022, and the money keeps rolling off in spite of the Fed lowering its target interest rate.
Donald Trump is getting a recession. If he enacts his stupid tariffs at just the right time, he will take a massive amount of blame for the recession. In some ways, he should get blamed, but not because he will be president in 2025. It’s because of the big spending and money printing that he helped endorse in his first term, particularly in 2020 with virus hysteria.
We need massive federal government spending cuts. We need massive government deregulation. We need for the Fed to stop running the printing presses on ludicrous speed whenever there are bad economic times.
The Everything Bubble will finally come to an end. It is just a question of whether the Fed will try to blow it up again and how quickly. The people who are banking on the stock market always going up 8 to 10 percent per year over time are in for a lesson. There will be a reversion to the mean.