While everyone expects inflation to rise, here’s a part of the detailed analysis I did on Patreon 👇💯

2025 Expectations: A Comprehensive Analysis

January 16New
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Why Understanding Macroeconomics Is Crucial for Analysis?
Conducting analysis without a solid macroeconomic foundation can lead to errors in future planning and push us into an unsustainable cycle of coincidences.
Key Focus: For markets and risk assets, the most critical factor is the FED. Currently, the FED's primary concern is inflation.

If inflation continues to rise, the probability of rate hikes increases, potentially leading to significant corrections in the market. In this scenario, it would be unlikely to see gains in high-risk assets like miners and altcoins. Therefore, a detailed examination of inflation data is essential.

Let’s dive in...

Inflation Data: Detailed Breakdown

Headline and Core Inflation Figures
CPI YoY: 2.9%

CPI MoM: 0.4%

Core CPI YoY: 3.2%

Core CPI MoM: 0.2%

The figures were generally below expectations. Notably, 40% of the monthly change in headline inflation (0.4%) stemmed from energy costs.

Projection: With Trump 2.0’s agenda to reduce energy costs, this risk factor may diminish. Consequently, headline inflation may no longer pose a significant monthly risk.

Takeaway: These developments suggest the U.S. could enter a disinflationary phase in 2025.

Dissecting Core Inflation: Goods vs. Services

Goods:
Still in deflation territory at -0.5%, a positive signal for the FED.
Services:
Declined from 4.6% to 4.4%, reaching its lowest level since February 2022.
Context: February 2022 marked the acknowledgment that inflation was "not transitory." This decline is a notably positive development.

Super Core Inflation

This metric, which excludes shelter and focuses on core services, is closely monitored by the FED.

Monthly: 0.21% (lowest since July 2024).
Why July 2024 matters: The FED delayed a rate cut it should have made, later executing a jumbo 50 bps cut in September.

Yearly: 4.05% (lowest since December 2023).

Implication: The continued disinflationary trend suggests rate cuts could accelerate in the coming periods.
Shelter Component: In-Depth Analysis

Within the shelter category, the "Other lodging away from home including hotels and motels" subcomponent dropped from 3.7% last month to -1.2% this month.

Insight: The shelter component doesn’t pose as high a risk as feared by the market.

Conclusion: Disinflation and Rate Cuts

The disinflation process is ongoing, and rate cuts could occur sooner than anticipated. Waller's comments today also support this view. Although there were doubts about my earlier soft landing forecast, these analyses validate my predictions.