It promises to be a bit of a turbulent day today. Not only is there a raft of vital and not-so-vital data out in the US- CPI, Empire State survey, TIC, industrial production, and Michigan consumer sentiment- but it is also triple witching in the equity market, which is sure to create even more volatility. Macro Man is receiving plenty of advice that "if CPI is x , then do y" from his professional counterparties, but wonders if that isn't a tad simplistic.
It's not hard to imagine a scenario wherein core CPI prints a market-friendly 0.1 or 0.2, albeit with another nasty headline reading, and risk assets soar. What to do, then, if industrial production and especially capacity utilization are much higher than expected, and if Michigan survey inflation expectations take a decidedly upward tilt? The people who buy bonds at 5.17 could easily end up selling them back at 5.25.
So while the temptation is there to trade on CPI, regardless of the outcome, prudence probably dictates waiting for the remainder of the data before pulling any execution triggers. Macro Man, for one, would rather incur some degree of opportunity cost than take another ride on the Whipsaw Express.
It's not hard to imagine a scenario wherein core CPI prints a market-friendly 0.1 or 0.2, albeit with another nasty headline reading, and risk assets soar. What to do, then, if industrial production and especially capacity utilization are much higher than expected, and if Michigan survey inflation expectations take a decidedly upward tilt? The people who buy bonds at 5.17 could easily end up selling them back at 5.25.
So while the temptation is there to trade on CPI, regardless of the outcome, prudence probably dictates waiting for the remainder of the data before pulling any execution triggers. Macro Man, for one, would rather incur some degree of opportunity cost than take another ride on the Whipsaw Express.
