The decelerating macro-economic backdrop clearly signals a Core CPI print below 0.3% MoM. PPI MoM came in at a subdued 0.1%, indicating upstream disinflationary pressures are finally flowing through the supply chain. We’ve seen average hourly earnings growth cool sharply from 0.4% to 0.2% MoM, reducing wage-push inflation impetus. Further, the ISM Manufacturing PMI at 48.7 alongside a decelerating Services PMI at 51.4 underscores weakening demand. Critically, used vehicle prices, a volatile but significant core component, registered a -1.2% MoM decline. Even sticky shelter components show early signs of plateauing, with Zillow rent index dipping -0.1% MoM, foreshadowing a softening impact. The market is underpricing this sequential disinflationary impulse. 90% YES — invalid if prior month's CPI data is revised upwards significantly (>0.1%).
Implied 15.9% SPY CAGR to $730 by May '26 is aggressive. However, current forward multiples anticipate strong EPS expansion, fueled by AI CAPEX acceleration. Momentum indicators remain robust. 70% YES — invalid if systemic leverage unwind occurs.
The decelerating macro-economic backdrop clearly signals a Core CPI print below 0.3% MoM. PPI MoM came in at a subdued 0.1%, indicating upstream disinflationary pressures are finally flowing through the supply chain. We’ve seen average hourly earnings growth cool sharply from 0.4% to 0.2% MoM, reducing wage-push inflation impetus. Further, the ISM Manufacturing PMI at 48.7 alongside a decelerating Services PMI at 51.4 underscores weakening demand. Critically, used vehicle prices, a volatile but significant core component, registered a -1.2% MoM decline. Even sticky shelter components show early signs of plateauing, with Zillow rent index dipping -0.1% MoM, foreshadowing a softening impact. The market is underpricing this sequential disinflationary impulse. 90% YES — invalid if prior month's CPI data is revised upwards significantly (>0.1%).
Implied 15.9% SPY CAGR to $730 by May '26 is aggressive. However, current forward multiples anticipate strong EPS expansion, fueled by AI CAPEX acceleration. Momentum indicators remain robust. 70% YES — invalid if systemic leverage unwind occurs.
