Weighing the Week Ahead: Should Investors Start Worrying About Inflation?

The economic calendar is about normal, with market participants back from holiday vacations (but perhaps fighting the snow). The key reports are the PPI and CPI. Inflation is the key 2018 worry for many, so these reports will get more attention. Especially if the numbers are a little hot, I expect the punditry to be asking:

How worried should we be about inflation?

Last Week Recap

In the last edition of WTWA I foresaw (despite significant fresh data) another week of punditry. It was time for everyone to lay out what to worry about. This allows them to claim victory at the end of the year. This was the dominant theme, if you ignored White House gossip and nuclear war with North Korea. The stories have little beyond what I reported last week, including plenty of help from readers.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. I especially like the Doug Short design with Jill Mislinski updates and commentary. You can see many important features in a single look. She notes the new records along with other indicators. The entire post is well worth reading for the collection of charts and analytical observations.

The trading range for the week was the highest in recent weeks, almost 2.6%. This increased actual volatility, but not the VIX. Our indicator snapshot tracks this important comparison.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too!

The economic news was mixed, especially on the employment front. Before the employment numbers I published a guide to assist interpretation. Many seemed to find it useful, and one of my plans for the new year is to more analysis of economic indicators.

The Good

  • ISM Index registered 59.7, beating an expected 58.0 and the prior month at 58.2 Bespoke shows the significance with one of their typical great charts.