Following the release of the CPI report for October, yields on two-year Treasuries experienced a significant drop, while stock futures climbed sharply.
The report indicated a slower-than-expected pace of inflation has bolstered speculation that interest rates have peaked, and there may be a possibility of rate cuts by the Federal Reserve in mid-2024.
JPMorgan Asset Management's analysts see the cooling consumer prices data as signaling that the economy is moving toward the Federal Reserve's target inflation level of 2%.
In an interview with Bloomberg TV, the analysts mentioned that the CPI report aligns with the bank’s expectations, and they disagree with the outlook that the "last mile" needed to bring down prices will prove sticky.
“Across the board, there’s disinflation in the US economy, and we’re heading back to 2%,” the analysts said.
Despite some portions of the stock market being overpriced, low inflation could facilitate lower long-term interest rates, which typically benefit stock prices.
The analysts also noted that the economy has not experienced a "price wage spiral," and there is limited evidence of corporations pushing prices higher or workers pushing wages higher.
The analysts’ colleagues at JPMorgan advised investors yesterday to sell bond and stocks and instead buy commodities.
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