$VIX - Consolidating Toward an Obvious CatalystLong before Putin rolled his tanks and 180k troops into the independent and democratic nation of Ukraine, there were rightful concerns about inflation and its effect on the US economy. The war in Eastern Europe has served as a convenient distraction for us while we laugh off Jerome Powell's 'transitory' inflation comments.
There have been some indications that inflation was beginning to ease. Economists have largely argued that the economy is healthy- but the Fed was behind on hiking rates. This was put on the back burner as Putin makes grave errors in Ukraine.
Now we are already sneaking up on CPI data release again. The fed chairs have been arguing back and forth between a .25 and .50 hike for over a month. Powell said just yesterday he is leaning toward .25 but left the door open to .50 if the data supports it.
The last CPI was higher in the wrong direction - and the market didn't like it. Over the 12 months from January 2021 to January 2022, the Consumer Price Index for All Urban Consumers (CPI-U) rose 7.5 percent. This was the largest 12-month increase since the 12-month period ending February 1982. Food prices increased 7.0 percent over the past year, while energy prices rose 27.0 percent.
Prices for food at home rose 7.4 percent over the last 12 months. All of the six major grocery store food groups increased over the period. By far the largest increase was that of meats, poultry, fish, and eggs, which rose 12.2 percent over the year. Prices for dairy and related products increased 3.1 percent, the smallest 12-month increase among in the food at home category.
Prices for food away from home rose 6.4 percent over the last year, the largest 12-month increase since January 1982.
Within the energy category, gasoline prices rose 40.0 percent over the last year, despite declining in January. Prices for natural gas rose 23.9 percent over the last 12 months, and prices for electricity rose 10.7 percent.
Prices for all items less food and energy index rose 6.0 percent, the largest 12-month change since the period ending August 1982. Within this grouping, prices for shelter increased 4.4 percent over the past year, prices for medical care services were up 2.7 percent, and prices for transportation services increased 5.6 percent.
So where does this leave us now?
With a lot of questions and uncertainty. Which is what the market likes the least out of all things.
The VIX has been making lower highs and higher lows for several days and the triangle above suggests a collision path right smack dab on March 10th.
How will the war affect the consumer price index? This remains to be seen.
One can assume only more supply chain disruptions and some added inflation in certain parts of the economy.
A short reminder on what CPI is from the US Bureau of Labor Statistics: The Consumer Price Index (CPI) measures the change in prices paid by consumers for goods and services. The CPI reflects spending patterns for each of two population groups: all urban consumers and urban wage earners and clerical workers. The all urban consumer group represents about 93 percent of the total U.S. population. It is based on the expenditures of almost all residents of urban or metropolitan areas, including professionals, the self-employed, the poor, the unemployed, and retired people, as well as urban wage earners and clerical workers. Not included in the CPI are the spending patterns of people living in rural nonmetropolitan areas, farming families, people in the Armed Forces, and those in institutions, such as prisons and mental hospitals. Consumer inflation for all urban consumers is measured by two indexes, namely, the Consumer Price Index for All Urban Consumers (CPI-U) and the Chained Consumer Price Index for All Urban Consumers (C-CPI-U)
