Oil & Jobs factor into lower Inflation
Macro Perspectives
It’s the last day of November, and as it stands, the price of crude oil is down 9% in November.
This will factor into the inflation number we'll see on December 13th.
It will factor in favorably (i.e. a negative drag on inflation). And, of course, that will factor into the Fed's view of the rate path. Conveniently, the Fed's next decision on rates is December 14th (a day after the inflation report).
Remember, last month Jerome Powell said, "we do need to see inflation coming down decisively, and good evidence of that would be a series of down monthly readings."
As we've discussed here in my daily notes, observing real-time inflation data over the past few months (on things like car prices, housing prices and rents, etc), rather than relying on the stale data within the government's inflation report, we should expect negative monthly price changes coming down the line.
Indeed, this November report is setting up for a negative monthly reading (i.e. a decline in prices from October to November).
We'll have a big negative input for energy prices, and if the spike in layoffs in the tech industry, in November, are any indication that the job market is softening, we have a formula for a retrenchment in prices.
On the jobs front, we'll get more information over the remainder of the week.
At The Gryning Portfolio, we’ve been monitoring the relationship CL 0.00%↑ (crude oil) has with XLE 0.00%↑ (energy sector).
The current spread of ~62% is significantly off the geometric mean of 14% and median of 9%.
Trading the spread is a trade that has potential for a significant pay-off. Join below if you want a front row seat as we navigate (and trade) the macro trends.