Inflation Scare in Wholesale Inflation Report

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Wholesale inflation (PPI) surged in October, the fastest pace in six years. The headline was 2.9% and the core-PPI ex-food and energy was 2.6%, both beating expectations. This effectively eliminates any prospect that the FOMC may pause in December. The market does not like it. Meanwhile, Crude Oil WTI is in a Bear Market, having crashed briefly hitting $59 from $75 a month ago. No one is talking about this unusual event but the last time oil prices crashed was due to China’s growth markedly slowing. Is it happening again? – yes and no. It is hard to tell since I do not trust China’s government statistics – for obvious reasons. Back to inflation. The market may be concerned about inflation but with a determined Fed, slowing global growth and one of our Global Perspectives Big Three in trouble, I believe inflation risk is highly overstated – as it has been for the past decade.

Please see page 62 of the Global Perspectives book.

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