The latest CPI numbers were released for August 2025. The CPI was up 0.4% for the month. The year-over-year now stands at 2.9%.
The median CPI, which tends to be less volatile, was up 0.3% on the month and stayed at 3.6% annually.
Forecasts had predicted a monthly rise of 0.3% and an annual rise of 2.9% for the CPI. This means that it was a rounding difference, but the actual numbers came in slightly higher than expected.
To offset this little bit of bad news was more bad news. The number of unemployment filings came in higher than expected.
Therefore, the bad news of slightly higher price inflation was offset by the bad news of higher unemployment. The first piece of bad news indicates that the Fed can’t be as loose with its monetary policy. The second piece of bad news says, “Don’t worry about the first piece. The higher unemployment gives us a green light to lower rates at the next Fed meeting.”
In other words, the bad news that favors lower rates typically wins out.
Investors Love Everything in Bubble Mania
Higher price inflation? Who cares? Buy more stocks and mutual funds.
Higher unemployment? Who cares? If anything, this just gives the Fed more incentive to lower rates. Buy more stocks and mutual funds.
It doesn’t matter what the news is these days. Even tariffs don’t seem to bother investors any longer. No matter what it is, the market just keeps marching higher.
The Dow closed above 46,000 for the first time ever. The Nasdaq closed above 22,000 for the first time ever.
This is bubble mania. No matter what the news is, it is twisted into a good reason to buy more equities.
When the markets hit new highs, it means that the economy is strong. And since the economy is strong, you should buy more stocks.
Does this all make sense? It only makes sense in the context of bubble mania.
We don’t know when the bubble mania will end, but we know that manias always come to an end. They end when the irrationality can’t get any more irrational. They also end when people don’t have any more money to speculate because they are using it for necessities.
The bubble mania will end slowly and then all of a sudden. Then there will be a mania in the rush for the exit door. You don’t want to sell when everyone else is trying to sell.