I’ll keep it brief this week as we drift noisily towards Q1 reporting season and little of interest crossed my desk this week.  While we really learned nothing new with respect to Fed policy from the release of last month’s minutes, the market seems preoccupied with the risk of policy error or Fed impotence to fight this inflationary impulse.  I like the 65/35 odds the guys at BCG macro assign to non-recessionary vs. recessionary outcomes:

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And while it may generate headlines and clicks, the likelihood of a structural break in the inflation regime remains a low and distant probability:

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But there is a growing chorus of pundits and commentators like Dillian that think the inflation regime has already become unanchored:

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That’s not the message from the data, however:

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And demand destruction is beginning to appear in the data as well, with the ISM Manufacturing report’s Book to Bill ratio dipping below 1 for the first time post-pandemic:

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And while the macro doom forecasts with respect to future supply chain driven inflation from China’s Covid response and Russia’s Ukrainian misadventure get all the headlines, two of the more significant sources of inflationary pressure appear to be abating with used vehicle pricing and other durable goods heading towards outright deflation:

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And perhaps we will begin to see some moderation in Home Price Appreciation:

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Although affordability concerns, higher rates, and limited supply are doing little to dent the demand side of the equation:

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And it’s not like the significant undersupply of housing suddenly improved:

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But let’s not let facts ruin a good panic in the space:

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