Welp, just when you thought inflation was starting to cool down and we’d all get back to the good ol’ days of normal price tags and affordable eggs… leave it to friggin CPI to disrupt our regularly scheduled bull market with a friggin Randy Johnson type curveball. 

(Source: Giphy) 

In short, the Consumer Price Index (CPI) came in hotter than expected yesterday, and it’s got everyone on Wall Street sweating through their Brooks Brothers. Analysts were betting on inflation to keep cooling, but instead, it ticked up 0.2% month-over-month and 2.4% year-over-year, just barely overshooting the 2.3% prediction. Close… but no cigar.

(Source: CNBC) 

The reasoning? Food prices (shocker). Apparently the cost to buy groceries is still giving everyone “sell a kidney” vibes as five of the six major grocery store food group indexes increased month over month - with food prices as a whole rising 0.4% to 2.3%. 

Keep in mind, this comes right after six months of essentially being about as flat as a pancake. So yeah, not necessarily a good sign, especially with “egglfation” making a comeback as egg prices jumped 0.8% MoM and a whopping 8.4% YoY. 

On the other hand, shelter inflation’s (see: rent and housing) rate of increase was less than half its rate of increase in August. Which to some might not seem like a big deal, but with this metric being a tad bit over 30% of the index, its bigly big. Meaning, if you’ve been hoping for a break in your rent or mortgage, well… we’re getting there. Slowly but surely. 

(Source: CBS) 

Meanwhile, over in the labor market, initial jobless claims shot up to 258,000—the highest in a year. But, but, but… while that looks like “recession” numbers, let’s remember that this data is about as reliable as Oklahoma weather predictions. It’s volatile and one week doesn’t make a trend (see: DOL miscalculation clusterf***k a few months ago).

(Source: Fox Business) 

Yet, still, the fact that layoffs are creeping up isn’t exactly a heartwarming sign. If companies are cutting jobs faster than expected, the “immaculate disinflation” narrative might be heading out the window.

So, with that said, what does this all really mean? Well, like mentioned, inflation’s being a stubborn little booger, jobless claims are rising (thanks, hurricanes), and the stock market wasn’t exactly thrilled to hear the news. Stocks sold off, with all three major indexes being in the red as the S&P 500 dipped -0.21% - while investors rushed to gold and other precious metals like they were the last bottle of water at Coachella. 

(Source: Giphy) 

But again even with that bit of a scare, it’s important not to freak out just yet. Sure, yesterday's print ruffled some feathers—but in the grand scheme of things it’s not like we’re heading back to the dark days of 9% inflation. However, for those of us who were hoping for a smooth ride into 2024, this is the equivalent of hitting a speed bump at 60 mph. A bit jarring, I might say. 

(Source: Giphy) 

And now, the Fed really does have quite a bit to chew on, especially after that girthy 50 point slice Powell blessed us with last month. Meaning, will we stay flat with rate cuts, possible hiking in the future to mitigate the “hotter than expected” numbers? Or do we acknowledge the growing signs of a cooler labor market and ease up? It’s a classic dilemma: inflation on one hand, employment on the other. Which mandate wins, and what mood will Powell be in during the FOMC meetings? 

For now, the market’s leaning toward the Fed holding steady or maybe even cutting rates by a modest 25 basis points in November. But if inflation keeps being about as stubborn as my frigging three year old, all bets are off, friends. 

(Source: Giphy) 

In the end though, as we gear up for this morning’s opening bell, the consensus is clear: inflation’s still here, shelter costs are the MVP this month, jobless claims are ticking up, and your portfolio might be looking a little sad from yesterday's hit. But hey, at least we are now heading into the carnage of earnings season… yay. 

In the meantime, be aware of the surroundings of your portfolio, and as always stay safe and stay frosty, friends! Until next time…