Another Happy Day For Bond & Stock Investors

As inflation continues to descend, bond and stock prices are ascending. Today's lower-than-expected CPI inflation report confirms that inflation is continuing to moderate. So the 10-year Treasury bond yield fell to 4.44%, boosting the valuation multiples of stocks. The S&P 500 is now up 9.2% above its recent correction low on October 27 (chart). Our yearend target of 4600 for the index could be achieved in a matter of days, though the market may find some resistance at the downtrend line around 4550.

October's headline and core CPI inflation rates were 3.2% and 4.0% y/y. Those are still above the Fed's 2.0% target, but have declined significantly from last summer. These two rates excluding shelter plunged to 1.5% and 2.0% (chart)! We know that rent inflation is heading lower. So the Fed is likely to get to 2.0% for the overall inflation rate next year rather than in 2026. That's well ahead of schedule, confirming that inflation is turning out to be transitory rather than persistent after all.