Inflation on an easing glide-path is a view in the eye of the beholder, while it really isn't evident in real life, or even official Oil & Agricultural price levels.

As to how the market responds, 'even if' inflation is easing where detectable, it is still August/September and the process of correcting excessive optimism late in the move up from our S&P low last October is a work-in-progress.

Yes growth will be key; and if the Fed 'finally' not only pauses but reverses to a lower rate regimen, then money will tumble out of Treasuries and so on that have been yielding as much as 5% (hence money pouring in most recently).

So once the process wanes and it's time to get more interested, conditions of growth and the economy will matter, while the leadership will come from 'tech' first-and-foremost (despite the breakdowns and lower demand discussions for semiconductors.. which by the way has nothing to do with preparations for the new-generation substrates... like Silicon Carbide and advanced photonics). It may be that Oil needs to support an advance too; but Oil stocks are high and a favorite here for years; but I just think you won't get that much appreciation in Energy stocks from 'this' level, unless for some reason they correct first.

In-sum: the yield-curve is still steepening as there is some fear that mortgage rates will go up even if the Fed reverses (because of higher demand). I doubt it and while there are polar opposite views of everything; this is just a process that we looked for in August and September, and many variables remain.

Dare I emphasize that the implications of the Maui catastrophe are broader in a few ways yet discussed. Fires or natural disasters.. including hurricanes yet to develop and likely threatening the SE United States next month, already do have the attention of 're-insurers', which is why general multi-line carriers are frequently pulling-out of areas like coastal Florida, all of California; and maybe Hawaii next. Most all lenders require full insurance for anyone with mortgages so that will greatly diminish the universe of buyers for homes or even condos, in impacted areas. Yes you can be 'free & clear' and self-insure, but a smaller proportion of buyers do that. So you get more societal bifurcation resulting.

As to markets, the segmentation of society is a serious negative; and in that regard inflation (with or without insurance and tax aspects) is the bane of the common man; while it's a boon to Treasury and the Fed, who with Congress, got us into this Debt situation which ultimately has to be dealt with. Servicing that Debt is now so expensive that it risks impinging on military preparedness, disaster relief, or anything else because politicians (and overzealous Feds) do not grasp the limited effect what they've doing has on inflation.

Coming out of the pandemic, I bemoaned a Fed staying 'too low for too long' which spurred recovery but at the expense (we suggested) of more pain later. Later would essentially be now; and while they can say inflation if below last year's (at times) 8% pace, it's not actually declining. Rising at a slower pace is not exactly the same as declining. It means real prices are even higher now.

In any event, I belabor the point: this Fed doesn't control Oil prices; and The White House is hampering that a bit by buying for the SPR 'after' Oil went up; which is inexplicable (we urged them to in the high 60's.. they waited...wrong). Oil prices impact gasoline and diesel, and hence food delivery costs. So all of it is not a question of 'whether' there is still inflation; it's also the 'weather' that is impacting crops (not bad in some areas) and a huge swath of America now.

There was no particular news regarding individual stocks on Friday. Debate as to whether China has another huge real estate catastrophe were present; as well as discussion about the obvious chatter about Semiconductor as well as reduced cellphone demand. That put extra pressure on SOX and Apple; but neither are surprising and seasonally iPhone sales are always lower now; with iPhone 15 coming in almost exactly a month.

More By This Author:

Market Briefing For Thursday, Aug. 10
Market Briefing For Wednesday, Aug. 9
Market Briefing For Tuesday, Aug. 8

Bottom-line: this is a choppy downward evolution for S&P; with higher Yields as well; and not surprising. It's August; and this can evolve into September as well. Furthermore, it doesn't require many investment-grade shifts, unless one is trading for minimal moves; or (down the road) accumulating for 2024 action. Core or not; inflation remains high. Elevated or not; if we get a serious 'crunch in S&P and NDX', that's going to become interesting for ensuing gains; but for now it's August, it can drag-on, and there's no reason for excess involvement. It's been about a month since we criticized a majority of negative managers all along since last October, who suddenly capitulated (in July) to 'soft landing' or optimistic outlooks. We have suggested 'softish' all along; but stuck with clear expectations for S&P to retreat after the upside phase from June to mid-July. That doesn't mean the 'economic landing' is soft or harder (which could occur not just due to energy prices rising; but commercial property default calamity, if it happens); just means we thought it was time to fade the move and build a bit of buying power for opportunities as and if they unfold over months ahead, not merely days or weeks. Of course we'll try to finesse short-term moves but I continue to think it's premature to chase big stocks and only nibble on drops in smaller stocks, but generally there's no rush or urgency to be too engaged. The new week 'probably' starts with a further shakeout then a rebound again; within context of the overall declining pattern; flirting with key technical levels.