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“Don’t fight the tape” and its more modern-day equivalent “the trend is your friend” are familiar Wall Street cliches that perhaps best capture the market’s present bullish mood.  Indeed, this week all major US indices hit 15-month highs. 

The propellant for this latest move was seemingly good news on the inflation front.  Both the Consumer Price Index (CPI) and Producer Price Index (PPI) beat expectations with lower inflation numbers than estimated, and the Wall Street spin machine used this news to argue that the Fed need not raise interest rates at its next meeting. 

Following this news, bond yields fell, and stock prices rose; and the big bet now is on a “soft landing” that will accommodate the bulls.  This hoped-for soft landing will, according to the bullish calls, result in a continued decline in inflation without a rise in the unemployment rate.

Fair enough, but let’s first take a deeper look at this week’s actual inflation news. 

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