Inflation is Slowing Down, but Recession Risks Loom
Today’s unsurprising CPI report sent stocks higher, as inflation is slowing down, but recession risks still loom. All of today’s inflation measures came in as expected:

It's good to see that YoY CPI inflation has been slowing down since its 9.1% peak last summer, while the MoM figure turned negative for the first time since mid-2020.

Nevertheless, core CPI, which strips out food and energy prices, is proving to be a little more stubborn. It's only down 0.9% off its highs of 6.6% on a YoY basis, while the MoM figure ticked up slightly higher from last month.

It's worth noting that current estimates for January's core CPI report, provided by the Federal Reserve Bank of Cleveland, point to a higher MoM print of 0.46%. The same can be said with CPI, which is currently expected to increase by 0.5% MoM.

Now, these estimates will change as January plays out, but the fact that current expectations point to an acceleration highlights why the Federal Reserve is unwilling to take any chances when it comes to prematurely cutting interest rates. Too much uncertainty remains, and the central bank's restrictive policy will likely lead to a recession.

Interestingly, 98% of CEOs in the U.S. believe that a recession will occur, according to a report from the Wall Street Journal. Although most of them expect the recession to be short and shallow, it'll still impact profitability which would affect stock prices, whose valuations are typically determined by earnings multiples.

As a result, investors ought to remain careful and focus on stocks with relevant business models and strong earnings power.

Good luck to all!
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