Latest / Markets with Megan: A Quick Financial Markets Update / Are Markets Overestimating Rate Cuts? | S2 E003 | 01-15-2025

Transcript

Are Markets Overestimating Rate Cuts? | S2 E003 | 01-15-2025 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: The market surely did like that CPI report.
• 0:02
  Megan Horneman: Today it is Wednesday, January the 15th, and today we got the December reading on the Consumer Price Index.
• 0:10
  Megan Horneman: This is one of the key inflation reports that we get each month, and this is ahead of the Fed's meeting, and we were looking to see for inflation at the headline level to rise 0.4%.
• 0:21
  Megan Horneman: And it did At the core level, though.
• 0:22
  Megan Horneman: This is why the markets are really liking this report did At the core level, though.
• 0:24
  Megan Horneman: This is why the markets are really liking this report today.
• 0:27
  Megan Horneman: At the core level, which excludes food and energy, it actually only rose 0.2% and the expectation was 0.3%.
• 0:35
  Megan Horneman: And when you look at the year-over-year levels, the headline is now growing a little bit hotter than it was last month at 2.9%, and the core level is growing at 3.2%, which is a little bit lower from the 3.3% we saw in November.
• 0:51
  Megan Horneman: So let's dig into the details here.
• 0:53
  Megan Horneman: The inflation at the headline level was really driven by the commodity side of the market, which did increase for the month.
• 1:00
  Megan Horneman: But when you strip that out and you look at some of the things like food, that actually grew at a slightly lesser pace for the month.
• 1:07
  Megan Horneman: But let's look at some of the areas that we still have a little bit of concern with, and that's on the service side.
• 1:13
  Megan Horneman: So if you look at things like transportation services, they're still growing 7.3% on a year over year basis, led by.
• 1:22
  Megan Horneman: If you look at things like motor vehicle insurance, which is up 11%.
• 1:26
  Megan Horneman: When you look at owner's equivalent rent, that actually ticked a little bit higher from 0.2% November to 0.3% in December, so it's growing almost 5% on a year-over-year basis.
• 1:38
  Megan Horneman: These are the things that the Fed's been talking about the services, the housing, the wages.
• 1:42
  Megan Horneman: These are things the Fed's concerned about Now.
• 1:45
  Megan Horneman: We don't think it's going to have them do this report's going to have the Fed do anything at their meeting.
• 1:51
  Megan Horneman: We think they're going to stay on hold.
• 1:52
  Megan Horneman: Obviously, inflation this was one good report on the core level, but there still is underlying within this report, some need for concern.
• 2:01
  Megan Horneman: So we think the Fed's going to probably stay on hold.
• 2:04
  Megan Horneman: We will take this month by month with these reports, but, as you can see, inflation is a very fluid situation and the markets are reacting to this.
• 2:13
  Megan Horneman: So the equity markets are up significantly today with the expectation that the Fed can continue cutting rates this year.
• 2:19
  Megan Horneman: I think this is just a one report.
• 2:22
  Megan Horneman: The markets are rallying on this and I just don't know that they're.
• 2:27
  Megan Horneman: I think they're getting a little too optimistic about where we are from an inflation standpoint.
• 2:31
  Megan Horneman: That's all we have today.
• 2:33
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• 2:36
  Megan Horneman: Hit that alarm bell and if you'd like any history of our prior podcast, you can go to marketswithmegan.
• 2:41
  Megan Horneman: fm.
• 2:42
  Megan Horneman: Thank you.