The headline is from Bryce Elder at FT Alphaville. He goes on to mention this week's CPI as a possible trigger but I'm pretty sure he's just spitballin' here and does not believe we will see a hotter than expected print.
The thing to know about inflation at this point is that it is becoming entrenched, that rather than going higher we should watch for it going wider. So while the folks who last year were scoffing that it's only lumber and it's only used cars will rejoice and trumpet the news from the rooftops when the headline number gets back below 8%, the Bank for International Settlements is warning about potential wage-price spirals.
Back to Mr. Elder.
He has seen just about everything the equity markets have to offer and is masterful at cutting through b.s. to get to what's what and who's who, and the introduction to this morning's Further Reading post does just that.
The fact that he's confirming my priors....
From FT Alphaville:
....Solid reported earnings mean bottom-up consensus forecasts for the S&P 500 have held steady, at around 10 per cent EPS growth this year and 9 per cent next. The S&P’s decline in the year to date can therefore be attributed almost entirely to multiple compression as real yields rose. Chart via Goldman Sachs:
....MUCH MORE
And the priors?
There's this:
Repeating For Clarity and Emphasis...
....For the broader market, first comes p/e multiple contraction followed by revenues held up only by inflation and should we enter a recession, declining earnings....
And a hundred or so other posts on rates and inflation and speaking of which, I just saw a forecast for Britain's economy: 10% inflation and 0% growth.
There's a word for that, stag-something, a word the used cars and lumber peeps were scoffing at not that long ago.
