🇺🇸 The prediction markets around the new Fed chair are indicating Warsh is likely to be nominated by the end of February and confirmed by May. [Polymarket]

Revised analysis is on the way for that...

🦅 I N T E L R U N N E R 🦅

🇺🇸 The energy and consumer staples sectors have been quite strong the last few months as investors rotate out of megacaps and tech.

$XLE is up 23.3% since December 16th. $XLP is up 15.8% since January 9th. Each are up 22.7% and 14.7% against the S&P 500 from each of those respective dates.

There have also been fairly substantial flows into Financials ($XLF), as banking ETFs like $KBWB have also appreciated quite a bit, as well as Industrials ($XLI) and Basic Materials ($XLB), which have been lagging the leaders slightly (probably due to gains unseen by said leaders last year).

Financials (outside of banks) have had the worst run year to date, pulling the sector down 5.64%. Technology is right behind, withdrawing 3.26% this year.

If this bull is to continue, we'll want to see leadership from something other Energy and Staples, which scream "inflation!"

🤑 I N T E L R U N N E R 🤑

🇺🇸 So the big red flag was supposed to be in Supercore CPI, otherwise known as Core services exempting shelter.

Throw in some random goods and toss out whatever goods have inflated most, and you have Paul Krugman's favorite inflation indicator du jour.

As you can see, the story of Supercore is really in transportation services. This was also the biggest category of increase in the CPI overall, but it has an outsized influence on Supercore. 0.32 of that 0.59% MoM increase was transportation.

The prime driver was airline fare, which came in at 6.5% MoM, likely an annual increase. Motor vehicle fees also got their CPI-indexed bump this January. Motor vehicle insurance, on the hand, fell 0.4%, correcting for serious price inflation over the past few years. Maintenance & repair of vehicles was essentially flat at +0.1% (but 4.9% YoY).

Supercore is very much tied to wage inflation, and Supercore being where the Fed tries to avoid stickiness, one would expect Powell to point to this while refusing to cut further. Wage-price spirals, and all that nonsense; you'll probably hear the phrase if present trends continue into the February numbers.

They're up 1.9% YoY (stemming from a 1.2% increase in pay and a 0.6% increase in the average work week), but that pales in comparison to the damage that was done this decade.

📊 I N T E L R U N N E R 📊