12 May More Stimulus Please
We received an update on consumer inflation this morning, with the Consumer Price Index (CPI) showing a month over month decrease of 0.8%. On a year over year basis, the number fell by 1.2% to an annualized rate of just 0.3%. When stripping out volatile food and energy prices, the monthly number fell by 0.4%, and the year over year figure decreased by 0.7% to an annualized rate of 1.4%. While this strong drop was anticipated, this fall was the most ever recorded in the history of the report. This shows a dire weakness in the US economy, which will pave the way for the Fed and US Treasury to continue to support the markets.
The US stock market continues its mysterious and unjustified upward climb in early morning trading. Investors are betting on another big consumer bailout package which appears to be making progress as lawmakers debate how to appropriate the funds. I continue to believe that we will see the cost of supplementing taxpayers and businesses to be in the $10 trillion range. Although that estimate seemed irrationally high a couple months ago, it seems that more people are open to hearing my opinion. Just visit a local restaurant or mall and compare the crowds with what we saw in late February. It is clear that our economy opening is just a baby step towards a recovery. Many businesses and jobs will be lost in the months to come as employers adjust staffing to match the slowing demand.
Mortgage rates have been pressured higher in recent days. We will maintain a locking bias.