Rise and shine everyone.

I just realized that it’s Friday the 13th. While US markets don’t seem to be spooked, the Japanese markets certainly are. The Yen rallied this morning, and continues to remain relatively strong. The USD/JPY is close to taking out the December lows.

Some of that had to do with Industrial Production numbers coming out better than expected and the hawkish rhetoric from the BoJ speakers over the last 2 days. Remember stronger Japanese economy = more hikes.

And, some of that probably has to do with the markets pricing in a higher probability of a 50-bp cut from the Fed next week after Former Fed member Bill Dudley said that we ought to keep an open mind to it because the labor market is weakening considerably. Add to that, WSJ’s Nick Timiraos, aka Nikki Leaks is now saying that a jumbo cut may be forthcoming because the Fed is “nervous” keeping rates too high for too long.

All of this was probably sparked by the recent Jobless Claims numbers that continue to inch higher. Somehow, people conveniently missed the MoM PPI numbers yesterday that came in higher both at the headline and core levels.

I know we’re not supposed to talk about inflation anymore because it’s decidedly “uncool” but, the numbers are anything but cool. With the risks of commodity price shocks still very much in play, inflation remains a concern.

The ECB cut rates again yesterday by 25 bps but, it’s being called a “hawkish” cut simply because they did express concerns surrounding inflation. More speakers came out this morning talking about it as well. This comes from an economy that has slowed to below 1% and is risking a recession. They are still treading carefully.

So when we look at the US and the sticky shelter inflation, it’s hard not to pay attention to it. Here’s a fun fact, this year saw one of the lowest Spring Home Sales seasons.

Inventory is still low, with fewer houses coming to market. Even once the Fed starts cutting, it may not be immediately affordable for people to start buying houses. So availability and affordability both remain issues leading people to rent.

The truth is we’re probably not out of the woods as far as inflation is concerned. So yes the Fed will start easing but, cutting too fast, too soon will lead to an even bigger problem down the line.

I’ve said it before, and I’ll say it again. The Fed still has the opportunity to accomplish a relatively smooth cutting cycle and achieve a soft landing. Let’s hope they don’t pull a “Friday the 13th” on us!

US Equity Futures are higher again this morning, as the Mag 7 (or most of them) resumed their climb. Commodities are also higher, with Gold hitting an all-time high yesterday, and continuing to follow through. Yields are moving lower.

Chart of the Day - BofA’s Flow Show

Interesting chart of the week from Hartnett below - the demographic for voters has flipped in the US. There are more Millennials and Gen Z voters than Boomers for this election season. I’m guessing this does change - what’s important for people and what they’re looking for in a leader.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)