Inflation: Data vs Threat
The S&P 500 climbed 0.5%, marking 3rd day wining streak, while the Dow added 105 points and the Nasdaq advanced 0.6%.
Talks in London stretched into a second day, with both sides working late to finalise technical details, fuelling optimism over a potential agreement to avoid further tariff escalation.
Tech stocks were strong, with Tesla jumping 5.7% to lead large-cap gainers.
In contrast, JM Smucker plunged 15.6% after warning that tariffs were squeezing margins in its coffee business.
Elsewhere, Moderna fell 1.7%, while Pfizer rose 3% after US Health Secretary Robert Kennedy Jr. announced the removal of all 17 members of the Advisory Committee on Immunization Practices (ACIP).
We get the May CPI report today, which should continue to show more of the same: tame inflation.
For the Fed, the inflation data has become less important than the inflation threat of tariffs. So, they're data-dependent until it doesn't fit their preferred policy stance. Now they are forecast driven. As the San Francisco Fed president said earlier this month, they have to "look forward" to the potential inflation.
This is the Fed using its favourite policy tool to keep a foot on the economic brake pedal: forward guidance.
So, the Fed continues to hold back the economy with overly restrictive policy at a time when we need hot nominal growth to grow out of the debt problem.
The last time we had this level of debt, (chart above), the economy grew at an average nominal rate of 19% (in the early 1940s).
What could drive that kind of growth? The AI revolution.
On that note, Sam Altman, founder of OpenAI, penned a blog post saying, "we are past the event horizon." He means AI has now entered an irreversible acceleration, where the machines will start improving themselves.
A Moment of Appreciation
The Gryning Times is nearing five years (2 July) on Substack! To all of you, my readers & members, past & present, my sincere gratitude and appreciation - Thank You.
So whilst you can find 5 years worth of daily macro perspectives, we at Gryning also give you actionable, institutional-grade, information and diagnostics.
