As I note often, I try to track all kinds of data on the economy and I try to understand how that affects market behavior, but it appears hopeless to me. This morning we see that inflation is staying at a higher level than anticipated, probably re-accelerating and that is before tariffs. This means interest rates will stay up, which should be a negative for bond prices. But in early trading today, bond interest rates are actually down and prices up? Maybe fear about the effect of tariffs on the economy and company profits is causing a flight to the perceived relative safety of bonds–a perception that isn’t so solid in regard to US debt.
And, more on this later, note that a substantial component of ongoing inflation in today’s report was medical prices. As I have been saying for some time, both providers and insurers are putting through big price increases and that is a major part of the economy.
