Darius sat down with Maggie Lake last week on Real Vision’s Daily Briefing to discuss Immaculate Disinflation, Soft Landing, the Consumer, and more.

If you missed the interview, here are three takeaways from the conversation that have significant implications for your portfolio: 

1. There Is A High Probability That We Continue to Experience Downward Momentum in Inflation Over The Coming Months And Quarters

The Core PCE Deflator, which is the Federal Reserve’s preferred gauge for inflation, alongside the Supercore PCE, are both showing clear signs of deceleration. 

The deceleration is evident as the 3-month annualized rate of change is below the 6-month rate, which in turn is lower than the year-over-year rate. 

Additionally, the 3-month SAAR of Core PCE inflation is hovering around 2 to 2.5%, a range that aligns with what the Federal Reserve is comfortable with. 

Given these trends, there is a high likelihood that we will see continued downward momentum in inflation in the upcoming months and quarters.

2. Asset Markets Recently Transitioned to A Goldilocks Regime That May Prove Easy To Sustain Into 1H24

Our research indicates that the economy transitioned to a “Goldilocks” regime approximately two weeks ago.

We believe the economy can remain in the Goldilocks regime over the next few quarters, provided we avoid slowing to a below-trend pace in real GDP growth.

Current consensus estimates forecast a growth of 1% quarter-over-quarter (QoQ) annualized for the fourth quarter and a more modest 0-0.5% QoQ annualized for the first and second quarters of the coming year. 

If GDP growth aligns with these dovish projections in the forthcoming quarters, it could heighten investor expectations for a soft landing of the economy.

3. Recent Data Show The Consumer is Stable

Last week, we received updated Personal Consumption Expenditures and Income data that show the consumer is holding up well:

  • Real PCE growth slowed to 2.1% on a 3-month annualized basis, a figure slightly below trend pace
  • Good consumption decreased to a below-trend 1.9% on a three-month annualized basis
  • Services consumption decreased to an at-trend 2.1% on a three-month annualized basis
  • Real personal income increased slightly to a below-trend 1.2% on a three-month annualized basis

If the labor market remains stable, consumers should continue to fare well.

That’s a wrap! 

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