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Weekly review - Monthly inflation in the US published
15.01.2024
"Inflation" and "Fed" were the two most frequently used words in financial market commentary in 2023. The first full trading week of 2024 brought us a fresh look at consumer prices and new discussions about what rate dynamics might look like.
Last week, all attention was focused on the publication of the consumer price index, so the CPI rose to 3.4% compared to the same month in 2022. Inflation accelerated slightly from 3.1% in November. The core consumer price index, which excludes food and energy, continued to slow, falling to 3.9% from 4%. US energy prices fell 2% in the previous month, which also affected the cost of gasoline, which fell 1.9%. There is a slowdown in the growth rate of the cost of various goods: food to 2.7% from the previous 2.9%, new cars - to 1% from 1.3%, clothing - to 1% from 1.1%, medical supplies - to 4.7% from 5%, and transport services - up to 9.7% from the previous 10.1%.
We believe that the path to the 2% inflation target will be difficult. Some components of services inflation continue to persist. However, we think the situation will continue to slowly normalize over the course of the year.
What data can be considered leading indicators of inflation:
• Rent growth for new leases has slowed after jumping sharply in 2022, but this has not yet been fully reflected in the house price index, which lags more recent market data by several quarters.
• A decline in job vacancies indicates a slowing labor market, which could lead to lower wage growth and therefore lower service sector inflation.
• Consumer inflation expectations are declining, affecting actual inflation. The New York Fed's latest survey, released last week, points to the lowest annual inflation expectations in three years.
• In contrast to the consumer price index, the producer price index (PPI), also released last week, was below expectations and unexpectedly decreased by 0.1% compared to the previous month. This pressure on wholesale prices should help reduce consumer price inflation.
• Energy prices are unstable due to geopolitical uncertainty, which is now heightened. However, WTI prices are around $73, close to the lower end of the two-year range. Cheaper oil is positive for lower inflation.
A positive January is a positive year? Historical market statistics
Historically, if the S&P 500 returns were positive in January, the index will be positive for the rest of the year. The stock market has ended January with a rally 17 times in the last 30 years. In 15 of these 17 times, the market closed in the “green zone” at the end of the year. When January's gains were particularly strong (more than 4%), the average return for the full year was about 22% for the S&P 500. On the other hand, a weak start could be a sign of a difficult year ahead. Over the past 30 years, the stock market has recorded 6 annual declines, 3 of which began with a January decline of more than 4%.
Shares of Kazatomprom JSC are reaching record levels. What you need to know about uranium in 2024
At the end of last week, common shares of Kazatomprom JSC on the KASE exchange reached 19,620 tenge, showing an increase of more than 6% since the beginning of the year. And since the start of 2023, the stock is up more than 52%.
For uranium, 2023 was a phenomenal year. In our opinion, nuclear energy is the next phase of technological growth. Artificial intelligence trends and technological breakthroughs are all tied to energy. Currently, the driving force behind the uranium industry is a huge imbalance of supply and demand. We have a positive view on Kazatomprom shares and uranium.
The current uranium supply shortage is expected to widen by 2040, according to the World Nuclear Association.
Weekly schedule
Inflows into investment-grade bond funds have been rising since the start of the year.
Investment-grade companies are significantly strengthening their balance sheets, which makes them stand out against the backdrop of a slowing economy. Credit ratings have reached their highest level in the last 5 years. With yields on such bonds at fairly high levels, we believe this could constrain future issuances by limiting supply.
This material is distributed for informational purposes only. Distribution of this material does not constitute investment consulting activities. The information provided in this material does not constitute individual investment advice. The recipient of this material should not rely solely on the information presented to make decisions. Estimates, historical data and other information that may be contained in this material have been prepared by BCC Invest staff based on information and data obtained from public sources. BCC Invest does not check and
