Thu. Jan 27th, 2022

Markets are slated for a quiet weekend, with the close of SPX and DOW at new highs, while the Nasdaq continues to be dragged down by higher yields such as cyclicals continue to gain favor. A strong reading of the US PPI helped lift the US dollar on Thursday, highlighting the focus on price growth. The consumer will be the center of attention on Friday with UMich’s consumer sentiment survey. Below is the last sign of Cardano’s resistance against Ethereum as ADA / USD recovers $ 2.00. Ashraf has consistently pointed out over the past 6 weeks how Cardano continues to outperform most major cryptocurrencies (showing smaller declines than those observed in BTC and ETH).

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Cyclicals, Inflation Cuts and Cardano - Ada Eth August 13, 2021 (Chart 1)

The latest world trade seems to be based on the belief that inflation is rising and that the delta will soon grow, at least in the United States.

What is complicated in trading is that no one knows what will come next. Both inflation and covetous puzzles will take months to resolve and market participants will be on the journey.

On Wednesday, the US dollar was sold in a flat CPI, but on Thursday it rose again, as the PPI exceeded expectations by 7.8%, compared to the expected 7.3%. Basic production prices were equally strong.

This ebb and flow is likely to be a negotiating microcosm next year. The multitude of potential distortions in price data makes it difficult to define how they will ultimately determine the final figure of the stock. The CPI showed that car prices are surpassing, but the amount of profits coming back and soon is a mystery.

Keep in mind that markets don’t just set prices at 2% versus 3.5% inflation or when those levels will be reached. The market has little reason to fear price overruns. The real risk is that a spiral of wage prices will put the Fed behind the curve and lead to a discrepant set of surprise rises and could turn the low-rate environment upside down. Of course, this poses a high risk, but given the highs of US equities, it is a risk like no other.

Looking to the future, UMich’s consumer sentiment survey will offer some insights into consumer health, but the biggest driver of the market may again be inflation. The survey includes 1-year and 5-10-year views on prices, and if these change slightly, the market will take note.

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