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Discounting soft landing

Inflation in the U.S. for the month of October was published yesterday. 3.2% YOY, slightly better than expected and 4.0% for core CPI, better than expected as well. As a result of that, the S&P500 continued last week’s rally, and have almost closed the gap with the September peak. Additionally, expectations for a rate hike for the FOMC meeting in December have gone from almost 30% to zero. It would appear the market keeps discounting the good news of lower inflation, but seems to ignore that inflation is going down because demand is lower, which is not good for markets. In fact, if demand keeps going down there’s a reasonable chance the economy falls into recession or a severe downturn, but it seems the market is convinced it can have it both ways. Soft landing is in the books.

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