Core PCE Falls

Core PCE slowed to 3.9% YOY the lowest since Sept 2021 and something the FRB is certainly glad to see. Headline continues to be sticky, but then again, this is expected and should take some time usually 12-18 months from the onset of rate hikes for things to hit the breaks and numbers to turn corners convincingly. We know many believe there will be a resurgence of inflation, however given our massive debt pile, that is a massive deflationary headwind and once the FRB can start cutting rates, you will see everyone flip flop again. So do not believe that resurgence hype it is unfounded. Yes Oil is higher, but that is a supply issue and they want to eek out every inflationary dollar they can before the world realizes that we are in a massive recessionary environment which will crush the price of oil in time as well.

Anyway we saw chunky fixed income buying all afternoon across the board cash treasuries were well bid and the futures could barely keep up as the front end of the US yield curves continue to be bought in size. That note and bond buying has spilled over to this morning. We also saw a decent equity bid and that has continued through to today. As far as the numbers this morning, one thing did stand out and that is the continued deterioration of disposable income:

Source: Zerohedge

When we look at the current markets as of this email, its all green, risk on…for now:

Source: CQG, Magnelibra