Morning Roundup

By Mark Masterson on December 12, 2024

Good morning,

Below are the news items moving markets today:

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Executive Summary

Just like yesterday, the inflation data came in a little hot this morning.

The US Bureau of Labor Statistics has revised October PPI inflation HIGHER, from 2.4% to 2.6%.

Also, Core PPI inflation for October has been revised HIGHER from 3.1% to 3.4%.

This means that 6 out of the last 7 PPI inflation reports have now been revised higher.

With today’s 3.0% PPI inflation print, PPI inflation is now at its highest level since February 2023.

So, CPI, PPI, and PCE inflation are all officially back on the rise in the United States.

Here is what the PPI looks like…..

Kobeissi Letter 12 12 24

Looking at it this way, you can see it has curled higher…..

Liz Ann Sonders 12 12 24

In addition, the jobs data this morning was on the weaker side…..

• US Jobless Claims for w/e 7-Dec 242K vs. StreetAccount consensus 220K
• Continuing Claims for w/e 30-Nov 1,886K vs. SA 1,918K

So – as I have been saying, Trump will inherit an economy that has been running on deficit spending – and has now kicked inflation modestly higher.

Can the Fed keep cutting rates if inflation starts to move higher in a meaningful way?  I doubt it.  That remains to be seen.

Yet – the debt and deficit spending data has been less than promising.  Elon Musk and Vivek are going to have their work cut out for them in January.

Note from yesterday – here is what Janet Yellen had to say on Monday night…..

• US TREASURY SECRETARY YELLEN: I AM CONCERNED ABOUT FISCAL RESPONSIBILITY, DEFICITS NEED TO BE BROUGHT DOWN.
• US TREASURY SECRETARY YELLEN: I AM SORRY WE DIDN’T MAKE MORE PROGRESS ON FISCAL FRONT.

Then, I see this report from Zerohedge this morning…..

• According to the latest Treasury data released today, in November – the second month of fiscal 2025 – the US spent a massive $584.2 billion, a 14% increase from the prior year, and a record for the month of November.
• The surge in spending was far greater than the much more modest increase in tax revenues: in November, the US government collected $301.8 billion in taxes, up 9.8% from the $274.8 billion last November.

So – the debt spending has just increased, despite Yellen saying she is concerned about Fiscal responsibility.

Zerohedge 12 12 24

More on the data…..

By combining October and November we find that not only was the combined number of $624 billion some 64% higher than the corresponding period one year ago, but it was also the highest deficit on record for the first two-months of the year (and that includes the spending insanity during the covid crisis).

Putting the deficit in context, the budget deficit in October and November – the first two months of fiscal 2025 – are now officially the worst start a year for the US Treasury on record.

Again – Godspeed to Elon as he tries to stop the wasteful spending train.  Its not an easy task.

More from Washington…..

• Cristopher Wray to resign as FBI director before Trump’s inauguration (CBS, Reuters, FT)
• President-elect Trump invites President Xi to inauguration (CBS)
• Senate panel delays vote on SEC nomination Crenshaw, raising chances of an all-Republican SEC (Bloomberg)
• Trump considers former intelligence chief Grenell as special envoy for Iran (Reuters)

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Articles of Interest:

• Markets:

• Talk of weaker yuan, higher US tariffs sparks specter of large-scale forex movements (Reuters)
• Swaps price 98% chance of a quarter-point reduction next week from the Fed (Bloomberg)
• Economy:
• Trump has promised to tame inflation but even a president can only do so much (link)

• China:
  • China monetary shift signals economic worries but ‘bazooka-style’ stimulus unlikely (link, CNBC)
  • Chinese consumption stocks surge amid expectations for more concrete measures from a key economic policy (Bloomberg )
  • China poised to roll out an expansion of its nationwide private pension system (link, Bloomberg)
• Geopolitics:
  • Israeli and Palestinian officials explore Gaza truce with US envoy on Middle East shuttle mission (link , Axios)
  • US House advances defense bill that bans range of China goods from tech to garlic (SCMP)
  • NATO proposes raising defense spending target to 3% despite pressure on national budgets (FT)
  • South Korea President Yoon’s office hands over ‘very limited’ documents to block police raid (Reuters, Reuters)

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Charts of the day:

Like 2023, 2024 has been an indexers dream.

Did you know that fewer than 32% of S&P 500 companies have outperformed the S&P 500 index this year?

That is one of the lowest readings over the last 50 years.

 In fact, the performance from 2023-24 is almost identical to that of 1998-1999 – which was also a very narrow market.

Barchart 12 12 24

Expectations are quite high for the market heading into 2025.

Highest percentage saying markets will rise since 1987….

@rbrtrmstrng 12 12 24

Yet, insiders are cashing in on the price rises of late.

Corporate executive stock sales have hit an all time high, per FT:

FT 12 12 24

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Quote of the day:

“The biggest thing about making money is time. You don’t have to be particularly smart—you just have to be patient.”

— Warren Buffett