SignalPlus Macro Research Report (20231108): Core inflation declines, will risk assets usher in the next wave of rise?

With risk sentiment still high, the market spent a relatively calm 24 hours. Pill, chief economist of the Bank of England, said that mid-2024 may be the time to cut interest rates, signaling a dovish turn (Pill said, A first rate cut in August 2024 is not entirely unreasonable, at least in my view... If nothing new emerges, by that time you might be thinking about or reassessing the actions that were going to have to take."). The RBA also implemented their own version of a dovish rate hike", and released an accompanying statement on further monetary policy, triggering a rebound in interest rates in early trading in Australia and Europe.

Although the theme of an economic soft landing continues to ferment, trading in the U.S. market has been relatively dull. On the data front, the Atlanta Feds GDPNow forecast will increase fourth-quarter growth from 1.2% to 2.1%, and inflationary pressures continue to ease. Manheim An index of used car values ​​showed a 2.3% month-on-month decline in October, and the Cleveland Feds inflation forecast showed core CPI rising just 0.3% in November. Additionally, crude oil futures have fallen nearly 20% from their early October highs, pulling down real yields and thus helping the risk appetite trend.

Looking ahead, with the exception of next weeks CPI data, event risks in November appear to be very low and could actually trigger the next leg of gains in risk assets if core inflationary pressures slip further. We expect traditional financial investors to buy the dip and expect the Feds influence to diminish in the near future. As long as the view of a soft landing for the economy remains unchanged, we would cautiously consider a bearish move during the rebound.

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