The Week Ahead: Inflation

The U.S. Treasury and the American bond markets will be closed on Monday for the government’s Columbus Day holiday. The stock markets will be open as usual, although without bond trading, they will be lacking access to the most important of the leading indicators.

The prospects of inflation are the theme of the week’s economic reporting. The consumer price index, the most watched inflation measure, will be published on Thursday, and the producer price index (final demand) will be published on Wednesday, each at 8:30 a.m. New York time.

Today’s Book

The Return of High Inflation: Risks, Myths and Opportunities,

by Wolfgang H. Hammes

Preternaturally low inflation has been with us for a decade, and memories are fading of the long years of rapidly rising, sometimes runaway, prices.. As the Federal Reserve raises interest rates in defense against inflation, many voices can be heard muttering, “Inflation? What’s to worry? Don’t bring back the recessoin.”. Hammes argues that the risk of inflation is real, and in this well researched book provides a map of the world we’ll be trading in when (not if) inflation once again returns.

More about the book

Leading indicators (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, at 4:30 p.m. Thursday.

The S&P 500 index, reported continually during market hours.

Average weekly initial claims for unemployment, from the jobless claims report at 8:30 a.m. Thursday.

The index of consumer expectations from the University of Michigan consumer sentiment survey at 10 a.m. Friday.

Events arranged by day:

Wednesday: The producer price index-final demand at 8:30 a.m.

Thursday: The consumer price index and jobless claims, each at 8:30 a.m., the natural gas report at 10:30 a.m., petroleum inventories at 11 a.m.,  the Treasury budget at 2 p.m. and the Federal Reserve balance sheet and the M2 money supply at 4:30 p.m.

Friday: Import and export prices at 8:30 a.m. and the University of Michigan consumer sentiment survey at 10 a.m.

I also keep an eye on the Baltic Dry Index, updated daily, and the 10-year implied inflation rate which is the difference between the yields on 10-year U.S. Treasury notes and  10-year Treasury inflation protected securities (TIPS).

By Tim Bovee, Portland, Oregon, October 6, 2018


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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