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      Is the decline in inflation sustainable?

      While the Fed has continued to suggest that the current run of inflation isn’t a wage/price spiral, the data makes that a little bit of a tough sell – at least where core inflation is concerned. Shown below, lagged (using a four quarter moving average) unit labor costs track closely to core CPI…going all the way back to the 70s. While both ULCs and core CPI have come off of peak on a Y/Y basis, they have much further to fall in order to reach levels the Fed might consider benign inflation. With labor market data still coming in fairly warm (debatably hot), this could be the key data to watch to make sure a decline in inflation is sustainable.

      Is the decline in inflation sustainable?
      Source: Jefferies
      Size buying

      Garrett continues: "if everyone is so bearish, who is buying?"

      (un)natural answer = systematic community who have purchased ~100bn of global equities in the last 10 days.

      Size buying
      Source: GS
      You are consensus

      Goldman's derivatives guru Garrett: "if you’re bearish, you’re consensus … doesn’t mean you are wrong, but you are in the majority". On AAII sentiment he writes: "...investors have *never* been this consistently bearish… for 11 straight weeks, >50% or respondents have been negative on the market"

      You are consensus
      Source: GS