Guys, today was CPI day. Over the past two months, CPI day has become a bit more relevant again after months of it just being another macro data release.
But why is that? Do you remember the good old days when the whole financial world was anticipating the US CPI announcement to determine where the markets would go next? The same was true for crypto, but after a point last summer when CPI started slowing down and the goal of 2% inflation was once again on the horizon, the announcement couldn’t move the markets with the same force.
This seems to be the case now as well, but what's important is that the world is starting to pay attention again because last month we had a significant rise, surpassing expectations by far. This month, it was also higher than expected, albeit by a small margin.
source
The most important thing is that the conversation inside the Fed is beginning to shift again, from a potential rate cut somewhere this summer or early autumn to maybe at the end of the year or until and if the US enters a recession, in order to preserve the rate cut as a weapon for when it is absolutely needed.
But how does that affect the market? In my view, the bull market in traditional markets that's currently ongoing is something I wasn't expecting. We are reaching higher and higher levels in an era of high interest rates, which was supposed to be a period of risk-off sentiment.
However, after a hiatus last year, we've shifted back into risk-on mode, even riskier than during the unlimited printing of the Covid era. And of course, this also has a significant impact on crypto.
So, my thoughts are that this bull market, especially in traditional markets, is happening because the markets are trying to price in the potential rate cuts. However, this is extremely risky, and it might come back to haunt everyone because if the rate cuts don't materialize, then everything could collapse.