Here are the headline CPI numbers for the first 11 months of 2022:

November 2022: 7.1%

October 2022: 7.7%

September 2022: 8.2%

August 2022: 8.3%

July 2022: 8.5%

June 2022: 9.1%

May 2022: 8.6%

April 2022: 8.3%

March 2022: 8.5%

February 2022: 7.9%

January 2022: 7.5%

You can see a graph at the top of this blog as well. Do you notice anything? The CPI peaked in June 2022 at 9.1% and has come down every month since. Estimates for December 2022 – to be released Thursday at 8:30 am EST – are that this trend will continue and headline CPI will fall into the mid-6 % range. If so, the report could be a bear killer.

(Click on image to enlarge)

That’s because another month of cooling CPI would almost certainly ensure the Fed reduces its next rate hike on February 1 to 25 basis points. They will say that they’re not pausing, they will say “higher for longer”, they will say the job isn’t finished – but they will raise only 25 basis points. And despite all the jawboning, investors may start to see light at the end of the tunnel. That is, they will very likely start to anticipate the end of the Fed’s tightening cycle. And that could result in an explosive rally in stocks. The rally will not be sustainable because we’re heading for a nasty recession later this year, but in the short term the bears could be roadkill.

If you want to speculate on such an eventuality, I like the ARKK $36 Jan13 Calls which can be had for ~16 cents.

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