Inflation train left the station

Inflation train has left the stationMacro & OvernightInvestors ignored Powell’s Friday speech, indicating that the Fed remains prepared to raise rates. With falling bond yields and a weaker dollar, markets believe the inflation train has left the station, and the next train due is a recession. Regardless of their hawkish tones, investors no longer believe the central banks’ higher-for-longer rhetoric as rate cut expectations are now priced in for H1 2024.The longer rates remain at current levels, the greater the recession probability. This concern is reflected in lower oil prices despite a backdrop of increasing Middle East conflict.However, fears of rapidly lower interest rates risk inflation and financial repression. And higher prices for gold and Bitcoin reflect these concerns.The Bitcoin price action has become significantly more “risk-off” since the regional banking crisis. The price has now doubled since March and is up 140% YTD.This week’s US macroeconomic news includes ISM services data and JOLT job openings tomorrow, followed by nonfarm payrolls on Friday.Weaker jobs data will further fuel recessionary fears and drive rate expectations lower. A bullish set-up for the Santa equity rally, but raises the spectre of recession in 2024.UK Company NewsIt is a typically quiet Monday for UK company news, with nothing to highlight today. Prognosticator This communication is provided for information purposes only, and is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. Investors should seek advice from an Independent Financial Adviser or regulated stockbroker before making any investment decisions. Progressive Equity Research Ltd (“PERL”) does not make investment recommendations.Opinions contained in this communication represent those of PERL and/or our affiliates at the time of publication and PERL does not undertake to provide updates to any opinions or views expressed. PERL does not hold any positions in the securities mentioned in this communication, however, PERL’s directors, officers, employees, contractors and affiliates may hold a position,  and/or may perform services or solicit business from, any of the companies or related securities mentioned.Any prices quoted in our research are as at the previous day’s close.