{"id":37448,"date":"2022-09-14T05:41:36","date_gmt":"2022-09-14T05:41:36","guid":{"rendered":"https:\/\/thepatientinvestor.com\/?p=37448"},"modified":"2022-09-15T22:41:21","modified_gmt":"2022-09-15T22:41:21","slug":"cpi-shock-upsets-markets","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2022\/09\/14\/cpi-shock-upsets-markets\/","title":{"rendered":"CPI shock upsets markets"},"content":{"rendered":"<p>The consumer price index (CPI) dipped to 8.25% (seasonally adjusted) for the 12 months to August but disappointed stock and bond markets who were anticipating a sharp fall.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-cpi.png?resize=525%2C363&#038;ssl=1\" alt=\"CPI\" width=\"525\" height=\"363\" \/><\/p>\n<p>The S&amp;P 500 fell 4.3% to test support at 3900. Follow-through below 3650 would confirm earlier bear market signals.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-spx.png?resize=525%2C363&#038;ssl=1\" alt=\"S&amp;P 500\" width=\"525\" height=\"363\" \/><\/p>\n<p>Services CPI &#8212; which has minimal exposure to producer prices and supply chains &#8212; climbed to 6.08%. Rising services costs indicate that inflation is growing embedded in the economy.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-cpi-services.png?resize=525%2C363&#038;ssl=1\" alt=\"CPI Services\" width=\"525\" height=\"363\" \/><\/p>\n<p>Fueled by strong growth in average hourly earnings.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-cpi-wages.png?resize=525%2C363&#038;ssl=1\" alt=\"CPI &amp; Wage Rates\" width=\"525\" height=\"363\" \/><\/p>\n<p>But it is not only services that present a problem.<\/p>\n<p>Food prices are growing above 10% p.a. &#8212; signaling hardship for low income-earners.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-cpi-food.png?resize=525%2C363&#038;ssl=1\" alt=\"CPI Food\" width=\"525\" height=\"363\" \/><\/p>\n<p>The heavily-weighted shelter component &#8212; almost one-third of total CPI &#8212; climbed to 6.25%. We expect further increases as CPI shelter lags actual home prices &#8212; represented by the Case-Shiller 20-City Composite Home Price Index (pink) on the chart below &#8212; by 6 to 12 months.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-cpi-shelter.png?resize=525%2C363&#038;ssl=1\" alt=\"CPI Shelter\" width=\"525\" height=\"363\" \/><\/p>\n<p>CPI energy is still high, at 23.91% for the 12 months to August, but the index has fallen steeply over the past two months (July-August).<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-cpi-energy.png?resize=525%2C363&#038;ssl=1\" alt=\"CPI Energy\" width=\"525\" height=\"363\" \/><\/p>\n<p>The decline is likely to continue until the mid-term elections in November, as the US government releases crude from its strategic reserves (SPR) in order to suppress fuel prices.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-spr.png?resize=525%2C534&#038;ssl=1\" alt=\"SPR Levels\" width=\"525\" height=\"534\" \/><\/p>\n<p>The reduction in strategic reserves is unsustainable in the longer-term and reversal could deliver a nasty surprise for consumers in the new year.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-spr2.png?resize=525%2C68&#038;ssl=1\" alt=\"SPR Lowest since 1984\" width=\"525\" height=\"68\" \/><\/p>\n<h2>Conclusion<\/h2>\n<p>Strong CPI growth for the 12-months to August warns that inflation will be difficult to contain. Services CPI at 6.08% also confirms that inflation is growing embedded in the economy.<\/p>\n<p>Energy costs are falling but this may be unsustainable. Releases from the strategic petroleum reserve (SPR) are likely to end after the mid-term elections in November.<\/p>\n<p>The Fed is way behind the curve, with the real Fed funds rate (FFR-CPI) at -5.92%, below the previous record low of -4.97% from 1975.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-ffr-cpi.png?resize=525%2C363&#038;ssl=1\" alt=\"Real Fed Funds Rate (FFR-CPI)\" width=\"525\" height=\"363\" \/><\/p>\n<p>We expect interest rates to rise &#8220;higher for longer.&#8221; A 75 basis-point hike is almost certain at next weeks&#8217; FOMC meeting (September 20-21).<\/p>\n<p>Long-term Treasury yields are rising, with the 10-year at 3.42%. Breakout above resistance at 3.50% is likely, signaling the end of a four decade-long secular bull trend in bonds.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-10yr.png?resize=525%2C363&#038;ssl=1\" alt=\"10-Year Treasury Yields\" width=\"525\" height=\"363\" \/><\/p>\n<p>Stocks and bonds are both falling, with the S&amp;P 500 down 18.0% year-to-date compared to -25.4% for TLT.<\/p>\n<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-09-13-spx-tlt.png?resize=525%2C363&#038;ssl=1\" alt=\"S&amp;P 500 and iShares 20+ Year Treasury ETF (TLT)\" width=\"525\" height=\"363\" \/><\/p>\n<p>The best short-term haven is cash.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The consumer price index (CPI) dipped to 8.25% (seasonally adjusted) for the 12 months to August but disappointed stock and bond markets who were anticipating a sharp fall. The S&amp;P 500 fell 4.3% to test support at 3900. Follow-through below 3650 would confirm earlier bear market signals. Services CPI &#8212; which has minimal exposure to &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/thepatientinvestor.com\/index.php\/2022\/09\/14\/cpi-shock-upsets-markets\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;CPI shock upsets markets&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[44,46,10,13,34],"tags":[70,5301,854,5223,5335,5631,5224,1828,5632],"class_list":["post-37448","post","type-post","status-publish","format-standard","hentry","category-crude-oil-natural-gas","category-deficit-spending-employment","category-housing-economy","category-inflation-economy","category-us-canada-countries-regions","tag-10-year-treasury-yields","tag-case-shiller-20-city-composite-home-price-index","tag-cpi","tag-cpi-energy","tag-cpi-food","tag-cpi-services","tag-cpi-shelter","tag-inflation","tag-strategic-petroleum-reserve-spr"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>CPI shock upsets markets - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"CPI shock upsets markets - the patient investor\" \/>\n<meta property=\"og:description\" content=\"The consumer price index (CPI) dipped to 8.25% (seasonally adjusted) for the 12 months to August but disappointed stock and bond markets who were anticipating a sharp fall. The S&amp;P 500 fell 4.3% to test support at 3900. Follow-through below 3650 would confirm earlier bear market signals. 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He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters. Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis. Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008\/2009 and 2020 bear markets well ahead of actual events. He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.","sameAs":["https:\/\/facebook.com\/people\/The-Patient-Investor\/61572934660810\/","https:\/\/www.instagram.com\/colin_thepatientinvestor","https:\/\/au.linkedin.com\/in\/colintwiggs"],"url":"https:\/\/thepatientinvestor.com\/index.php\/author\/investor\/"}]}},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9tQ4n-9K0","jetpack_likes_enabled":false,"jetpack-related-posts":[{"id":38106,"url":"https:\/\/thepatientinvestor.com\/index.php\/2022\/10\/13\/no-cpi-relief-in-sight\/","url_meta":{"origin":37448,"position":0},"title":"No CPI relief in sight","author":"Colin Twiggs","date":"October 13, 2022","format":false,"excerpt":"CPI fell by a disappointing 0.03% -- from 8.25% in August to 8.22% in September -- signaling no let up in the Fed's fierce rate hikes as they struggle to get inflation under control. Energy was not a contributor, with CPI Energy falling to 19.9%, but is likely to face\u2026","rel":"","context":"In &quot;Inflation&quot;","block_context":{"text":"Inflation","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/inflation-economy\/"},"img":{"alt_text":"CPI","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-10-14-cpi.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-10-14-cpi.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-10-14-cpi.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":44643,"url":"https:\/\/thepatientinvestor.com\/index.php\/2023\/10\/13\/cpi-inflation-still-lurks\/","url_meta":{"origin":37448,"position":1},"title":"CPI: Inflation still lurks","author":"Colin Twiggs","date":"October 13, 2023","format":false,"excerpt":"CPI kicked up in August-September due to a surge in gasoline prices but these are excluded from core CPI which continues downwards. Monthly figures show not only CPI rising -- at an annualized rate of 4.75% -- but core as well, at a slightly lower annualized rate of 3.88%. Monthly\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"CPI & Core CPI","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-10-13-cpi-core-annual.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-10-13-cpi-core-annual.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-10-13-cpi-core-annual.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":50941,"url":"https:\/\/thepatientinvestor.com\/index.php\/2024\/04\/11\/cpi-spoils-the-party\/","url_meta":{"origin":37448,"position":2},"title":"CPI spoils the party","author":"Colin Twiggs","date":"April 11, 2024","format":false,"excerpt":"The consumer price index (CPI) jumped to 3.5% in March, from a low of 3.1% in January 2024. Core CPI increased slightly to 3.8% but excludes energy which is the largest contributor to price increases. Monthly CPI increases have been trending up since October 2023, with annualized rates of 4.5%\u2026","rel":"","context":"In &quot;Crude Oil &amp; Natural Gas&quot;","block_context":{"text":"Crude Oil &amp; Natural Gas","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/gold-commodities\/crude-oil-natural-gas\/"},"img":{"alt_text":"CPI & Core CPI","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2024\/2024-04-10-cpi-core.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2024\/2024-04-10-cpi-core.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2024\/2024-04-10-cpi-core.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":61944,"url":"https:\/\/thepatientinvestor.com\/index.php\/2025\/06\/12\/low-cpi-but-stocks-hesitant-as-us-iran-tensions-flare\/","url_meta":{"origin":37448,"position":3},"title":"Low CPI but stocks hesitant as US-Iran tensions flare","author":"Colin Twiggs","date":"June 12, 2025","format":false,"excerpt":"Summary Stocks remain cautious despite low May CPI inflation Oil prices jumped on escalating tensions in the Middle East The dollar continues to test long-term support, threatening another decline Gold is again testing resistance at $3,400 per ounce The S&P 500 remains tentative due to uncertainty over trade policy, the\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"S&P 500","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-06-11-spx.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-06-11-spx.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-06-11-spx.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":60931,"url":"https:\/\/thepatientinvestor.com\/index.php\/2025\/02\/13\/cpi-causes-a-sharp-rise-in-10-year-treasury-yields\/","url_meta":{"origin":37448,"position":4},"title":"CPI causes a sharp rise in 10-year Treasury yields","author":"Colin Twiggs","date":"February 13, 2025","format":false,"excerpt":"A rise in CPI to 3.0% caused a sharp increase in the 10-year Treasury yield and a corresponding fall in the S&P 500 despite ultra-easy financial market conditions. Consumer Prices Inflation remains stubbornly above the Fed's 2.0% target. The January 2025 BLS report shows that CPI increased by 3.0% over\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"CPI & Core CPI - Annual","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-02-12-cpi-core.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-02-12-cpi-core.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-02-12-cpi-core.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":63405,"url":"https:\/\/thepatientinvestor.com\/index.php\/2025\/12\/19\/dont-believe-the-november-cpi\/","url_meta":{"origin":37448,"position":5},"title":"Don&#8217;t believe the November CPI","author":"Colin Twiggs","date":"December 19, 2025","format":false,"excerpt":"Key Points Core CPI growth slowed to 2.6% for the 12 months to November, according to the latest CPI report. However, the report should not be trusted. Core CPI growth fell to 2.6% for the 12 months to November, according to the latest BLS report, compared to 3.0% in September.\u2026","rel":"","context":"In &quot;Banks &amp; Interest Rates&quot;","block_context":{"text":"Banks &amp; Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"CPI & Core CPI - Annual","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-12-18-cpi-core.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-12-18-cpi-core.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2025\/2025-12-18-cpi-core.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/37448","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=37448"}],"version-history":[{"count":5,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/37448\/revisions"}],"predecessor-version":[{"id":37476,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/37448\/revisions\/37476"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=37448"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=37448"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=37448"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}