Michael Jordan's Take on Wall Street's Nosedive: Is Inflation Rekindling the Fire?

Inflation Strikes Back Bonds Sell Off

So inflation decides to make a comeback huh? Well it looks like bonds got scared and started selling off. The 10 year Treasury yield shot above 4.30% and equity prices took a dive. Just when you thought everything was going smoothly inflation swoops in with its fiery breath.

Cramer's Predictions Take a Hit

I gotta hand it to Jim Cramer he's been warning everyone that the economy is too strong for a rate cut. Looks like the odds of a rate cut in May dropped faster than a basketball slipping out of my hands. From 61% to 33%? Ouch. Cramer might need some ice for that burn.

Surprise Surprise! Inflation Numbers Aren't So Cool

Well well well look at these numbers. The headline CPI was up 0.3% in January higher than the expected 0.2%. And year over year? It's up 3.1% when we were only expecting 2.9%. That's inflation for you always sneaking up when you least expect it. Just like when I dunked over Patrick Ewing.

Services and Shelter Costs Keep the Flame Alive

When it comes to sticking around shelter costs take the crown. They account for about a third of the headline CPI and boy did they make a statement with a 0.6% increase monthly and 6% increase year over year. It's like they're putting up a brick wall against any hopes of cooling inflation. And let's not forget about medical care and transportation adding fuel to the fire with their price hikes.

Goods Costs Take a Dive Can't Put Out the Flames

While the prices of services continue to rise like a game winning shot goods costs just can't seem to keep up. Commodities are down 0.3% monthly and yearly new vehicle prices are going nowhere fast and used cars and trucks are taking a major hit. Looks like the demand is still there but the goods just aren't cutting it anymore.

Playing the Inflation Game

So what's the game plan here? We don't want to jump to conclusions based on one month's report. But hey if inflation decides to come back with a vengeance brace yourselves for higher Treasury yields and lower equity prices. However let's not throw in the towel just yet. The January CPI supports the idea that the Fed hasn't tightened too much and there's no rush to cut rates. It's like a game of basketball with the economy chugging along and inflation hopefully taking a breather.