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There's An Elephant In The Room. · ANGLES.

• 0:01
  SPEAKER_00: There's an elephant in the room.
• 0:03
  SPEAKER_00: My weekly market review, April 14th, 2024.
• 0:08
  SPEAKER_00: In the end, it proved to be a rotten week for US stocks.
• 0:12
  SPEAKER_00: A geopolitical shadow hung over markets the whole time with American officials warning of an imminent Iranian reprisal for Israel's deadly airstrike against a consulate in Syria, which kept the price of oil very perky.
• 0:26
  SPEAKER_00: Meanwhile, domestically, the big news was more hot inflation data and a slowly emerging troubling concern about the prospects for interest rate cuts in 2024.
• 0:38
  SPEAKER_00: JPMorgan Chase CEO Jamie Dimon used his annual letter to shareholders on Monday to add his voice to the quietly growing chorus of those warning that the Fed's next move might not be an interest rate cut at all, but rather a rate increase.
• 0:55
  SPEAKER_00: He listed factors including ongoing fiscal spending, increased U.S.
• 1:00
  SPEAKER_00: remilitarization, restructuring of global trade, continued geopolitical unrest, and the capital demands of a new green economy as inflationary factors that could feasibly result in interest rates in fact moving higher this year, contrary to the conventional wisdom that interest rate cuts are just around the corner.
• 1:22
  SPEAKER_00: Stock traders, however, appear to be biding their time to start the week, preferring to focus more on the eclipse and swapping highly dramatic New York earthquake stories ahead of U.S.
• 1:34
  SPEAKER_00: inflation data out later in the week.
• 1:37
  SPEAKER_00: And prices barely moved on what was the second lowest trading volume day of the year so far.
• 1:43
  SPEAKER_00: Tuesday was no different, another lackluster trading session for stocks, with indexes little change for a second straight day.
• 1:51
  SPEAKER_00: Market interest rates continued their relentless march higher, with the 2-year, 5-year and 10-year treasury yields all touching new highs for the year.
• 2:00
  SPEAKER_00: This pushed bond prices lower.
• 2:04
  SPEAKER_00: Pre-market on Wednesday, the release of the Consumer Price Index CPI measure of retail inflation showed that stubborn upward price pressures persisted in March, appearing to slam the door shut on any lingering hopes of a Fed interest rate cut in either May or June, especially since the May CPI reading is scheduled to come out on the same day as the Fed's June decision.
• 2:29
  SPEAKER_00: Even the probability of a cut in July was pretty much reduced to a toss-up.
• 2:34
  SPEAKER_00: March CPI rose 3.5% from a year earlier, higher than forecast and a meaningful pickup from February's 3.2%.
• 2:43
  SPEAKER_00: So-called core prices, ex-food and energy, rose 3.8% from a year earlier, unchanged from the previous month but above expectations.
• 2:53
  SPEAKER_00: This was the third consecutive hotter than anticipated inflation reading and reinforced the fact that while inflation is not showing signs of rebounding, its decline has definitely stalled.
• 3:07
  SPEAKER_00: The stock market's verdict was swift and brutal.
• 3:11
  SPEAKER_00: It headed straight into freefall right from the opening bell.
• 3:15
  SPEAKER_00: The zero interest rate cut in 2024, in fact, expect interest rate increases theory of Jamie Dimon and friends suddenly did not seem so fanciful after all.
• 3:29
  SPEAKER_00: Indeed, once ex-Treasury Secretary Larry Summers endorsed a theory on Bloomberg TV after seeing the inflation numbers, this particular elephant in the room suddenly started to become visible to everyone.
• 3:44
  SPEAKER_00: Those Treasury yields soared higher again, deeper into new 2024 record territory, sending bond prices spiraling even lower.
• 3:53
  SPEAKER_00: Even the often overly optimistic futures market-driven expected total number of interest rate cuts in 2024 ticked down from three to two.
• 4:04
  SPEAKER_00: Remember, as recently as January, these same markets were assuming seven.
• 4:10
  SPEAKER_00: The inflation picture got a bit more muddled on Thursday morning when CPI's cousin, the producer price index, PPI measure of wholesale inflation experienced by manufacturers, actually came in a touch softer than expected.
• 4:25
  SPEAKER_00: This helped stop the bleeding to a certain extent, as both stock and bond prices stabilized following the rout of the previous day.
• 4:33
  SPEAKER_00: Indeed, the Nasdaq in particular had something of a healthy pop, helped by Amazon's stock price hitting a new all-time high.
• 4:42
  SPEAKER_00: Friday was the official kickoff of the Q1 2024 earnings season, and the traditional curtain raiser of earnings and forecasts from some of the major banks could be described as mixed at best.
• 4:55
  SPEAKER_00: With spiking fears of an imminent flare-up in the Middle East conflict and the ongoing intertwined inflation and interest rate concerns, stock markets swiftly resumed their sharp downward trajectory, and by the close, Friday's nosedive had proved to be even worse than Wednesday's.
• 5:13
  SPEAKER_00: Although it was clearly responsible for a major sell-off in stocks last week, I want to put forward the case that the March CPI number was not of itself quite the destructive negative game-changer that many seem to now be fearing.
• 5:27
  SPEAKER_00: Contrary to what you may be seeing on TikTok or the more wacky fringes of Fox Business, we are not yet witnessing a rebound in inflation, just that the decline has stalled.
• 5:39
  SPEAKER_00: Annualized rates are heavily dependent on the base number from a year earlier, and even the 0.4% monthly increase was actually 0.359 if taken out to an extra decimal place, meaning that it was in fact only one hundredth of one percent away from the base number.
• 6:01
  SPEAKER_00: from actually meeting the expectations of a 0.3% increase, which might well have elicited a less dramatic market response.
• 6:11
  SPEAKER_00: Higher interest rates and elevated inflation do not of themselves mean stock prices are in danger of falling.
• 6:16
  SPEAKER_00: The keys are growth and earnings, which we need to watch very closely, since the safety net of imminent interest rate cuts is now likely gone.
• 6:26
  SPEAKER_00: If Q1 2024 earnings are strong and economic growth remains stable, then stocks can still move higher, despite lofty market interest rates and limited or even no Fed rate cuts.
• 6:40
  SPEAKER_00: With higher for longer interest rates as a result of inflation stickiness, the dominance of tech will likely continue to fade, most probably making way for sectors like financials, Friday's earnings notwithstanding, consumer defensive, healthcare, and energy.
• 6:59
  SPEAKER_00: This could lead to a more unified, less fragmented stock market that could be a rising tide that lifts all boats.
• 7:07
  SPEAKER_00: It's entirely possible that last week's experience will soon be either A, a rather forgettable speed bump in a continuing upward march in stock prices, or B, the turning point that brought the October 2023 to April 2024 rally to an end, which it is will be determined by how earnings and economic growth shake out in the coming weeks.