Market Overview Analysis by James Picerno covering: . Read James Picerno's latest article on Investing.com
report delivered a one-two punch for markets: slower-than-expected growth and hotter-than-expected inflation. In reaction, stocks fell and US Treasury yields rose. At first glance, the risk-off response looks reasonable. But a closer look at the GDP numbers still leaves room for debate.
But the same data on a year-over-year basis looks cooler. Notably, core PCE through Q1 eased to 2.9% from 3.2% in Q4. The Q1 print marks the slowest pace of inflation in three years. That leaves us with the key question: Which core PCE inflation is the more accurate version of what’s occurring? The answer, of course, is that no one knows since the future is still unknowable. That said, I tend to favor the year-over-year trend, for core PCE and other economic time series. Why? It filters out some, perhaps a lot, of the noise.
Accordingly, I’ll change my view if and when the 1-year trend stops falling or, even worse, turns up. For the moment, neither of those conditions looks likely, although I’m watching the incoming numbers closely from a range of data sets for an early warning that my assumption is wrong.
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