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Comment by tempsy | Hacker News Reader

Well cost cutting is bullish for stocks

There's going to be pain, but pain is good.

Economic data just out showed that wage growth is slowing. For normal folks that sounds bad, for economists it means inflation is finally being tamed.

What good is making more money if your money becomes worth less? The hard part is selling people on why stopping the status quo is actually a good thing.

The crazy prices of cars and homes was a great example of mania that was unsustainable.

the market is two steps ahead of economic data.

if you believed inflation was rapidly coming down now it would not be the time to get bearish on stocks

That's the problem, the market keeps thinking the Fed is bluffing.

Inflation is not rapidly coming down, it is stubbornly beginning to ease.

The inflation over the past 5 months is 1%, so 2.4% annualized.

No one thinks their bluffing, the market WANTS this, it depresses wages bringing costs down. Corporate profits are responsible for at least half of inflation, and wage growth is a good chunk of the other half. Profits are good reasons to raise prices, but wages isn't, and the market wants to put workers back in their place. They WANT a short recession.

Core CPI ex-shelter was negative the previous two months. The way BLS measures shelter is notoriously laggy. High-frequency metrics of shelter inflation (e.g. Zillow data)[1] is falling off a cliff.

The upshot is that while CPI is probably over-measuring inflation today, and we're basically back to baseline, earlier in the year we were probably running closer to 11-12% inflation with the real housing numbers.

[1]https://www.zillow.com/research/rent-inflation-31602/

Inflation is going down.

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