Chart of the Day – Inflation Expectations Are Not Well-Anchored
Source: Bloomberg
The University of Michigan monthly sentiment survey shows that consumers expect much higher inflation for a long period of time. The mean expectation for Inflation 5-10 years from now has hit a multi-decade high, up 5.3% yoy. This is nowhere in the ballpark of the Fed’s target of 2% inflation.
You can argue all you want about how terrible this survey is, how it’s politically biased, how it only surveys 400-600 people, whatever. Be Triggered. The data is the data.
Inflation expectations are not well-anchored in America regardless of what the Fed tells you. Folks are expecting much higher prices for a long time into the future. When inflation expectations are not well-anchored, the Fed has to work harder with monetary policy in order to bring those expectations down. That means tighter monetary policy for longer than people realize, which will be a further headwind for growth for a longer period of time. This does not bode well for risk assets. Trade accordingly.
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