Taps Coogan – February 13th, 2023

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In light of the January CPI numbers coming out tomorrow, the following chart from Jeroen Blokland highlights that there is still room for CPI to move lower.

The various leading indicators of inflation that fired off in late 2020 and early 2021, (ISM/PMIs, money supply, consumer spending, the stock market, inflation breakevens, etc…), are all pointing to inflation trending lower.

Given that debt levels, asset valuations, and demographics are diametrically opposite to how they were in the 1970s, the best case for reinvigorated inflation hinges on the War in Ukraine worsening/spreading and new energy shocks. As it would happen, we expect both but, until then the backdrop is disinflationary.