To The Moon

Once again on Tue, 12 Mar 2024, investors will digest one of the most important data points the Federal Reserve will reference, in its next interest rate decision: US February 2024 Consumer Price Index (CPI).

Wall Street forecast.

According to Bloomberg, the monthly inflation report, scheduled for release at 8:30 a.m. ET, is forecasted to show headline inflation of 3.1%, matching January's annual gain in prices. (see below)

This will be the latest inflation report, before the Fed's next FOMC policy decision on next Wed, 20 Mar 2024.

Investors are hopeful the central bank will cut interest rates sometime later this year.

February 2024 Estimates.

Over the prior month, core CPI is expected to rise +0.4%, a slight increase from January's +0.3% monthly increase. (see above)

According to Bloomberg, on a "core" basis, which excludes “volatile costs” of food and gas, prices in February are forecasted to have risen +3.7% over last year — a slowdown from January’s 3.9% annual increase. (see above)

$Bank of America(BAC)$ Economists - Stephen Juneau & Michael Gapen were of the view that:

• Increase in energy prices (boosted by gasoline prices jump), is the main factor why headline inflation is expected to rise this month.

• However, if “core” inflation estimates falls, it should alleviate “inflation is re-accelerating” concerns.

• Fact remains that “core” inflation has remained stubbornly elevated due to (a) higher costs of shelter and (b) core services like insurance and medical care.

Fed’s FOMC socialization.

• The blackout period prior to next FOMC meeting has kicked in since last Sat, 08 Mar 2024.

• It will last until 21 Mar 2024, a day after FOMC meeting has concluded.

• The latest & last socialization by any Fed member would be Mr Powell’s annual testify with US Congress that ended on Thu, 07 Mar 2024.

• So, more or less there is “clarity” on US Central Bank’s view with regards to interest cut.

To cut or not to cut?

Inflation has remained above the Federal Reserve's 2% target on an annual basis.

Fact remains that the Fed's preferred inflation gauge, the core PCE price index, has come in below 2% on a 6-month annualized basis, boosting hopes the central bank could begin to cut interest rates.

Since January 2024 PCE report was released on 29 Feb 2024, Wall Street has re-calibrated their expectations to be more realistic.

According to data from the CME Group, as of Mon, 11 Mar 2024 afternoon, markets were pricing in a nearly 100% chance the Federal Reserve keeps rates unchanged next week. (see below)

• Market now largely expects the central bank to begin cutting rates at its June 2024 meeting, pricing in roughly 60% chance of a cut. (see above)

• Alternatively, should February 2024’s core CPI arrives stronger than forecast, it would increase the likelihood of a later start to the cutting cycle. (see above)

My viewpoints: (mine & mine only)

• For US market to continue to “bubble” up, February CPI should minimally match forecast.

• If inflation falls “lower”, the $S&P 500(.SPX)$ index might just attempt to scale even higher this week.

• In my PICK post (click to read & repost), I have talked about adding to $Palantir Technologies Inc.(PLTR)$, I am waiting patiently for an “ideal” entry price — market permitting (of course!)

• At the same time, I am also monitoring closely $Vale SA(VALE)$ - the largest producer of iron ore and nickel in the world.

• Given a weak demand (from China especially) and a temporary supply glut, there may be a buying opportunity soon.

• Yes, I am exploring and looking to diversify my stock holdings. Why? see below.

Can never go wrong with metals-iron, the basic material for any industrialization.

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• Do you think US inflation will rise, fall or remain status quo?

• Do you think you will diversify your portfolio of stocks OR stick to one “good” stock?

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