April 10, 2024
Nominal m/m CPI 0.40% vs 0.30% expected
Nominal y/y CPI 3.50% vs 3.40% expected
Core CPI m/m 0.40% vs 0.30% expected
Core CPI y/y 3.80% vs 3.70% expected
My recent reduction in both equities and bonds in my Model Portfolios was a result of my concern that domestic US inflation would not come down as fast as expected.
These numbers have materially reduced the probability of a June interest rate cut to only 28%.
However, it is important to keep everything into perspective. The reason that the probability of an interest rate cut has been lowered is because of the strength and resilience of the US economy with strong employment growth and increase in consumer spending.
The strength in the US economy lowers the risk of an economic recession.
Recommendation
Having a cash reserve at this time will help cushion any market volatility. A small equity market correction of 5-7% would be healthy but would not take away the fact that we remain in a bull market.