Is the market already priced for disinflation, making CPI largely a rearview mirror?
Been thinking a lot about how we approach economic data releases lately, especially CPI. It feels like the market's current narrative is already firmly rooted in a disinflationary trend, or at least one where inflation is moderating enough to take rate hikes off the table for good. When the CPI numbers drop, good or bad, the immediate reaction often seems fleeting, or it's quickly digested and rationalized away by the broader macro story everyone's already bought into. It’s almost as if the big moves are already made in anticipation, and the actual numbers are just a confirmation or a minor adjustment, rather than a catalyst for a fundamental re-evaluation.
Take something like the ongoing volatility in commodities – we saw $CORN jump +1.95% today to 18.26, trading in a range of 18.045–18.295, and $NATGAS up +0.22% to 2.733, with a day range of 2.71–2.783. These moves are driven by very specific supply/demand dynamics and weather, etc., not necessarily by the latest CPI print. It makes me wonder if our collective obsession with CPI, NFP, and GDP has become somewhat ritualistic, with less actual impact on the current market direction than we might assume. Are we just confirming our biases with these releases now, rather than truly letting them inform our short-to-medium term trading decisions? I'm open to being wrong here, push back on this if you think I'm missing something crucial.
That's a solid point. It does seem like the market has largely priced in the disinflation narrative, but I wonder if there's still a significant risk of a surprise re-acceleration that could catch some off guard, especially with global supply chain uncertainties.