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Time Marches On, But Old Problems Persist, And New Ones Emerge

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Although the PCE index, closely watched by the Federal Reserve, fell to 4.2% year-on-year in March from 5% in February, core inflation, which excludes food and energy, came in at 4.6% year-on-year, only 0.1% lower than in February.


The situation in the energy markets is also not encouraging: the further rise in oil prices triggered by the cut in oil supply from OPEC+ countries in August, the decline in crude inventories in the United States, as well as upbeat data from the world’s leading economy could dampen disinflation.

Thus, the Fed is likely to raise rates again, and the S&P 500 seems to be taking notice.

Looking for more clues on the future of monetary policy, we will pay attention to Wednesday’s Beige Book and speeches by Barr, Daley, and Mester on Monday, and Barkin, Kashkari, and Bostic on Wednesday, as well as quarterly reports bу JPMorgan, Wells Fargo, and Citigroup on Friday.

As for the latter, market consensus suggests that JP Morgan’s Q2 earnings per share could be $3.97, up from $2.76 a year earlier, and Wells Fargo’s could be $1.18, up from $0.74 a year earlier. Overall, S&P 500 earnings are expected to fall 6.4% in the second quarter, with worse results in the energy and commodities sectors.

Beyond the (geo)political and macroeconomic problems, the onset of El Niño threatens heat waves, other weather catastrophes, and monetary and human losses. In addition, destroying crops and infrastructure could lead to higher inflation, prompting central banks to raise rates again.

The good news is that so far, we are in no danger of a repeat of the 2020 logistics crisis. For example, the water level of the Rhine River in Germany, although insufficient for full navigation of cargo ships, shows no signs of catastrophe. However, there may still be more to come.


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