BarroMetrics Views: Inflation
Last night we saw one of the strongest rises in the CPI. The stock market response was interesting – it chose to ignore the CPI. The pundits claimed it was just one month.
What is interesting for me is the last couple of reports of the Fred-AMB (Figure 1) had been flat i.e. the banks had not added or subtracted to their reserves at the St Louis Fed. So, my question is: did the falt reading augur the CPI rise or was this merely a coincidence?
Only time will answer that question. We have another AMB chart due out on June 20. I am eagerly awaiting it to see if there have been any change. A withdrawal of funds, (i.e. dip in the line) will bring us closer to the 3,800 B. This represents a 200B retracement from the high. In the past such a retracement has coincided (led?) to a sharp decline in the S&P – usually a 2-week to 6-week lead time.