Episode summary
July CPI and Market Melt Up | Bloomberg Surveillance
Bloomberg Surveillance
· · 29 min · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Eric Winograd, Marta Norton, Ira Jersey, Ed Yardeni, Amanda Lynam, Violetta Todorova
Summary
July CPI came in essentially as expected: overall consumer prices rose 0.1% month over month, core CPI rose 0.2%, and year-over-year inflation eased to 3.4% from 3.5%. The discussion focused on whether that print meaningfully changes the Fed outlook. The chief economist said the report “leaves the ball in play,” with shelter cooling and some disinflation still likely over the next few months, but not enough to settle the September decision on its own.
The conversation kept returning to how households experience inflation through the price level, not just the monthly rate, and why a “boring” report still matters because the Fed has more data coming before its next meeting. The host emphasized that the market had been looking for a worse number and instead got a print that was close to consensus, with only modest moves in yields and futures.
Later, the discussion broadened to the broader market rally. Ed Yardeni argued that the market’s euphoria is being driven less by FOMO than by “fabulous earnings momentum,” and he said the rally is broadening beyond the Magnificent Seven. Amanda Lynam said new issuance in investment-grade credit is being absorbed well, while Violetta Todorova argued the S&P 500 looks more like 1996 than 2000: overbought, expensive, but still capable of staying elevated for years.
Key takeaways
- The chief economist said the CPI print was not decisive for the Fed, because another CPI report, payrolls, and Jackson Hole remain before the next meeting.
- Core CPI at 0.2% month over month and 3.4% year over year was described as broadly in line with expectations and mildly supportive of further disinflation.
- Ed Yardeni said the rally is being powered by “FEMA,” or fabulous earnings momentum, and that the market is broadening beyond the Magnificent Seven.
- Amanda Lynam said more than $1.5 trillion of investment-grade issuance has been absorbed well, but tech-heavy jumbo deals are creating market indigestion.
- Violetta Todorova said the S&P 500 resembles 1996 more than 2000, meaning an overbought market can stay expensive for years.
Notable quotes
“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria”
“It's earnings have been phenomenal. And then this morning we just heard that some of these AI companies are continuing to you know, have home runs”
“We're calling for 2.1 trillion. There are a couple things that are interesting here and we actually see a lot of differences between prior periods of active re-leveraging in the credit market”
How the episode opens
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Eric Winograd here Raptor on CPI chief economist Alliance Bernstein. So, the rub is that lower inflation is wrapped around reduced real estate, reduced this, reduced that. Is it just those odd things that could draw down us towards disinflation or is there more going on than that?
Well, that's what we're going to find out in a little bit, right Tom? You know, I I think that last month's soft print was largely due to some unusual factors all sort of pointing soft in the same month. Uh but I know your colleague Anna Wong has been out with a piece arguing that that in that that today's number is likely to be lower because of some of these things.
I think she's largely right. I can't say for sure whether it'll happen with this month's print or next month's print, but the things she's pointing to are likely to point lower in our view over the course of the next few months.
Eric, I'm just looking at your notes which are very helpful because Chair Warsh has not been willing to tell us about his reaction function. He's left the impression that the market is in charge of determining whether the Fed hikes in September or not. So, if that's the case, we need to pay attention to this, I guess. For sure.
Look, I think because Warsh has left a vacuum, an analytical vacuum in the way that he talks about the economy, which is to say he basically doesn't talk about the economy.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- july cpi
- market melt up
- s&p target
- debt issuance
- tech lifting stocks
Companies and tickers mentioned
- AB
- GS
- AllianceBernstein
- Empower
- Bloomberg Intelligence
- Yardeni Research
- Goldman Sachs
- Leverage Shares
Watch the episode
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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