Markets were fairly quiet during the last week before rising strongly in the last few days after a fairly ambiguous US CPI print. Many observers have been puzzled by the market's sanguine reaction to the core measure which was only slightly above expectations but did  show a concerning uptick in goods inflation likely due to tariffs. Japan's market surged disproportionately, suggesting the influence of liquidity flows, while in the U.S., mega cap tech names have reported strong earnings amid AI investments, although there are also  signs of deceleration in the broader economy. Substantial capital inflows as people and companies front ended likely tariffs appear to the smoking gun while fiscal stimulus has also been helpful in supporting asset prices. However, as we discuss in this week’s What We Are Working on Video with Andrew Hunt, questions remain about the sustainability of these factors, leaving markets delicately balanced between inflationary and deflationary outcomes, with liquidity acting as a powerful but fickle determinant.

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