Global Macro Monitor

Brazilian stocks and currency outperformed this past week as inflation came in lower than expected, increasing speculation the central bank may cut interest rates. 

The inflation problem, we believe, is not so much about the price of money (interest rates)  but the quantity of money.  The problem with money is that we can’t define what money is in our high-tech and digital economy, much less measure it.  My margin brokerage account —  from which I can write checks —  is money but not counted in the aggregates.  M2 is so Flinstone.  

Gimme Shelter! 

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in March on a seasonally adjusted basis, after increasing 0.4 percent in February, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 5.0 percent before seasonal adjustment. The index for shelter was by far the largest contributor to the monthly all items increase. This more than offset a decline in the energy index, which decreased 3.5 percent over the month as all major energy component indexes declined. The food index was unchanged in March with the food at home index falling 0.3 percent. – BLS

Inflation, however, remains too high. The core CPI, which economists view as the better indicator of underlying inflation, was up 5.6% from a year ago. It’s the first time in over two years that the core came in above the overall measure, which was up 5%…The report offers glimpses of disinflation ahead even while highlighting the sticky nature of inflation — particularly within the service sector. While policymakers are closely watching for any sign that the latest banking turmoil is weighing on the economy, brisk consumer price gains paired with a still-strong labor market are likely to lead the Fed to raise interest rates at least once more before what they say will be an extended pause. – Bloomberg

Wow!  The data in the following table are so surprising it makes us think we made a mistake in our calculation.  Please try and replicate the table and confirm our calculations.

Gold has trounced the S&P500, both in price and total return, since the beginning of the 21st Century, not by a little but by bunches.  Entry levels determine returns and entry points matter!

Note the quotable quote in our post from yesterday labeling gold, “Boomer Rocks.”

“Yields are starting to look toward the Fed to pivot, and it looks like gold’s just ready to break out. I think these boomer rocks, they’re set up for a boom…”  – Mike McGlone, Bloomberg Intelligence Senior Macro Strategist

Hat tip to Carter Worth for pointing out the relative performance. 

Gold is approaching its all-time high (ATH) at 2,070ish after a nice breakout from a year-long Cup & Handle formation.  The measured move upside target is around $2,350, but it must first break the ATH.  Freakishly, gold is trading close to its ATH even as the Fed is almost done.  What does this signal?     

My priors were the battle between gold and crypto was a generational thing.   The following quote confirms it,

“Yields are starting to look toward the Fed to pivot, and it looks like gold’s just ready to break out. I think these boomer rocks, they’re set up for a boom…”  – Mike McGlone, Bloomberg Intelligence Senior Macro Strategist

We are betting on gold as it has thousands of years of history. 

The manufacturing purchasing managers’ indices (PMI) just dropped.  The chart below illustrates which countries’ manufacturing sectors are expanding and which are contracting.  The data are soft, derived from surveys, not hard numbers.  Reading through the PMI reports, a recurring theme was that of disinflation in both input costs and output prices.