Producer Prices Suddenly Loom Large After ‘Black Tuesday’
Good morning contrarians! Futures are up a bit after the worst day for stocks since June 2020. The PPI print at 0830 could be crucial…

Regarding yesterday’s sell-off, the facts as we know them have not really changed. These are:

  1. The Fed is raising rates to rein in inflation;

  1. The Fed is willing to risk breaking the economy to accomplish this;

  1. Existing interest rate hikes have not really affected the economy (other than mortgage rates);

  1. Stocks and bonds cannot sell off for the same time for very long before investors need to put the cash generated to work somewhere.

We have for some time argued that item number 4 will keep us range bound. Today’s activity could test that, especially if the PPI comes in hot.

But again: from a long-term perspective what exactly does that change? The market has tried calling the Fed’s bluff, going as far as to treat some throwaway comment from Jay Powell as an indication that the Fed was about to pivot on interest rates.

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