A solid rise in US producer prices in January aligns with consumer price data that suggests inflation may be picking up. For the year through January, the producer price index rose 3.5%, matching December’s gain and reflecting a moderately faster increase vs. recent history.
The market premium for the US 10-year Treasury yield rebounded sharply in January, rising to its highest level in nine months, based on a “fair value” estimate calculated by CapitalSpectator.com. Yesterday’s hotter-than-expected inflation data for last month suggests that the market premium will remain elevated for longer than recently expected.
US headline consumer inflation continued to accelerate, rising 3.0% in January vs. the year-ago level — the highest since last June. “The long national nightmare of inflation isn’t over yet for consumers, businesses, and investors,” writes Chris Rupkey, chief economist at FwdBonds, in a research note on Wednesday. “There could be some seasonality that pushes prices up at a faster clip in January, but today the news for [Federal Reserve] officials is all bad.” Josh Jamner, investment strategy analyst at ClearBridge Investments, notes: “The ‘wait and see’ Fed is going to be waiting longer than anticipated after a red-hot January CPI inflation report. “This report puts the final nail in the coffin for the rate cut cycle, which we believe is over.”
Yields on most assets around the world have edged higher this year. The increase reflects a range of concerns, including sticky inflation risk and greater uncertainty for global trade flows. The crowd, in other words, is demanding a higher yield premium these days, based on a set of ETFs representing the major asset classes.
Federal Reserve Chairman Jerome Powell said the central bank doesn’t “need to be in a hurry” to cut interest rates. Testifying in the Senate yesterday, told the Banking Committee: “With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance.” Meanwhile, the policy-sensitive 2-year US Treasury yield ticked up yesterday but remains in a middling range compared with recent history.
After two straight calendar years of red-hot performance, American shares are experiencing a run of muted results on the global stage. All the major slices of world stock markets are posting gains so far in 2025, but a notable shift from recent history is a subdued rise in US stocks vs. some its foreign competition, based on a set of ETFs through Monday’s close (Feb. 10).
Trump announces 25% tariffs on all steel and aluminum imports. The US is the world’s largest importer of steel — the top three suppliers: Canada, Brazil and Mexico. The metals are key components in various industries, including transportation, construction and packaging. The levies will take effect on March 4.
Morningstar last week advised that tactical asset allocation funds “failed—again.” That sounds ominous for this class of strategies, but a closer review suggests it’s misguided to pull the plug on the on idea that dynamically adjusting weights of asset classes has crashed and burned. As discussed below, the case for tactical asset allocation (TAA) is quite strong, assuming you’re an informed investor able and willing to separate the wheat from the chaff in this corner of portfolio management.
US non-farm payrolls rose 143,000 in January, a sharp slowdown from December’s strong increase. Meanwhile, the unemployment rate fell to 4.0% last month — lowest since May. “The weaker January increase masks what may be a firming trend in hiring,” advises a note from TMC Research, a unit of The Milwaukee Co., a wealth manager. “Using a 3-month average of payrolls to reduce the short-term noise suggests the hiring trend appears to be picking up. Note, too, that the 6-month trend turned above the 1-year change in January for the first time since May.”
● The Humble Investor: How to find a winning edge in a surprising world
Daniel Rasmussen
Interview with author via Bloomberg
Financial forecasting is a mainstay of finance and economics. Banks use them to analyze how well a company should be doing a few years from now; governments use them to set their budgets. But how often are those prognostications—on which so much depends— actually accurate? Not very often, according to Daniel Rasmussen, founder of Verdad Advisers, author of The Humble Investor: How to Find a Winning Edge in a Surprising World and guest on this week’s episode of Merryn Talks Money.