Hey guys, it's Sasha US Inflation data just came in and it did drop from 3.3 to 3.1% but Wall Street Was expecting to see 2.9 or 3% so the read was higher than expectations and the stock market did not take it well. reacted really badly, sending stocks deep into the red. A number of key items increased in month-to-month growth in January, which has gone against the grain of the longer term Trend that we've been seeing through the second half of last year. Food is up 0 4% month of month, and the 12- month figure for food is 2.6% Now, this is not a big thing in the overall picture, but this is the highest monthly increase in prices on food in the last 12 months, and Shelter came in at 0.6% month the month and 6% year- on-ear.

Which is again quite surprising because all the data related to shelter. all the data that should be underpinning the long-term trajectory of shelter is pointing down pointing to a big slowdown. Remember, shelter is a lagging indicator because it takes time for people to actually have their annual rent review. Move House Experience the change in property prices because that's what affects the shelter price.

Because if you don't move, if you haven't had a Chang in your rent prices, then you don't know what's actually happening out there in the broader. Market. But here is the Zumper report on rent prices and you can see that the year on-year rent increases have come right down and have been at just above zero for a while now, and data came in 3 weeks ago showed that the drop in house prices remained in the same place in Q4, which is also going to help. The high interest rates are definitely a big problem here, because that's the only Factor really that is pushing the shelter component of inflation upwards as opposed to downwards, which is what the other things are doing.

Mortgage rates are high at the moment, and although they did drop down in January from being relatively high in Q4, they are still pretty much in the same place as they were a year year ago slightly higher, but in the same ballpark. So this doesn't really explain the increase in we're seeing in the CPI data. Energy Prices are also somewhat confusing. Gasoline prices are showing big negatives month- on Monon and year on-year movements like that's good, but it's not really explained by oil because oil's been trading relatively consistently since the start of 2023, compared to the massive swings up and down beforehand and electricity and natural gas went up in January.

Electricity is up 1.2% month on month, and natural gas is up 2% These are really quite big increases when the price of natural gas, the sort of fundamental underlying commodity has crashed in exactly the same time period. And remember, the big price drops from 2023 have still not filtered through into consumer prices. but hey, that's nothing to do with the energy companies being greedy right elsewhere. Transportation Month-to-month figure was up at 1 %, and medical care services at 0.7% So the January inflation numbers do look a bit ugly right across the board.

It's not just one or two things really. It's almost surprising that the overall number actually went down at all. now. Things like shelter, the shelter number increase don't seem to make much logical sense because it is.

Bucking The data that should be underpinning should be running ahead of it and it's bucking the long-term Trend So you'd probably estimate that this could be a oneof buck in a long and slow Road downwards for shelter. but Energy Prices continue staying High Despite what we've been seeing with commodity prices, even though they've fallen so sharply last year, the energy prices still refused to come down. So Jerome Power is definitely going to be very happy today because he was busy selling this panic in recent interviews and the numbers in this inflation report do help him. They pretty much guarantee that the FED will definitely not be taking any downward action on interest rates at their next meeting.

They might as well just cancel them the meeting. although we do have one more inflation report before then for February, but something pretty major has to happen in February for this narrative. For this storyline to change, the weight of shelter in the inflation report has crept up to 36.2% So shelter alone is really driving the overall inflation number. And this is critical because all the indicators that should be influencing shelter are pointing down.

while the Cpri report is doing the opposite. the over inflation number is sitting at 3.1% and Shelter is at 6% And remember, shelter is 36% of the total. So if you work it out, that means that despite these increases in things like food, electricity, and so on, the rest of the inflation index put together except Shelter is at 1.45% So well under the Fed's 2% goal and the expectation based on commodity prices that at some point energy does have to continue following down more unless the government is just happy to let energy companies shamelessly profiter and screw their customers over core inflation that the FED prefers to look at as the less volatile and in their opinion, more representative metric of reality ticked up 0.4% month-to month the biggest increase in recent months and it's sitting at 3.9% year onye, which is going to give the Fomc more ammunition to give Panic selling interviews and say that you know interest rates should not drop anytime soon. and uh, we're going to stay tight.

We're going to keep the interest rates high and make sure that everyone's safe. The question you have to ask yourself though, is this are these numbers Is this CPI report a troubling sign that inflation is on the way up Again, it's all going to come crashing down, the world is burning and all of that, or is this a blip in the long downward Trend that inflation has been seeing over the last year and a half? Well, in premarket trading, the stock market has definitely decided that this is a major cause for panic. The stock market does not like to let a good Panic opportunity to go on use the S&P 500 has did 1.4% so far on pre-market trading as I am recording this video and tech stocks are getting completely smashed again And it's interesting how this is all really because Shelter posted one bad month with an unexpectedly High month-to-month increase. If the shelter number came in the same as the last 2 months at 0.4% the overall number would be a 3.0 and the stock market would probably roughly agree that it's kind of roughly in line with where they were thinking.

Now as an investor, you've got to ask yourself the question: At times like this: do you think this is a major inflection point in the long-term direction of the economy? Can you see supporting data and evidence that says that there is an economic and consumer confidence and you know Financial pivot? Are we seeing a general 180 degree turn in the way things are going? because the market will Panic each and every time something blips in the wrong direction. That's kind of their job. That's what they do. if you don't think this is a fundament, mental long-term problem.

If you don't think that there is a really big pressing issue, then these sorts of days can be a lot of fun because I'm just looking around the market and seeing a whole bunch of stocks trading at a big discount because a lagging CPI indicator based on surveys where all the underlying data actually looks good posted a bad month. The one number that really does concern me in this report though is the one that I'm betting most other the people probably don't really care about and it's this month-to Monon Food number which came in at 0 .4% This is a seasonally adjusted number, so it shouldn't be impacted by the seasonality of food prices. and of all the data in here, this is the one that I'd say is raising the most question marks in my mind. but the overall number without Shelter is still bang on well under the 2% Mark And we can see from the underlying data that Shelter has to come down in the next few months unless there is something a bit fishy and a bit weird about how that number is being collected and reported.

But I tell you what? I am going to go stock up on some popcorn to go and read all the Doom and Gloom salesman tripping over each other to say how bad these numbers are. I'm sure there's going to be a bunch of them in the comment section. If you want a bit of fun, head right there. A picture they say though tells a thousand words.

And here is the picture of this massive increase massive inflation problem since it peaked in the summer of 2022. Is it now sticky at 3% Do we have a long-term problem here? or is it just slowing down in a not very linear fashion on his Final Approach to Landing? Well you tell me.