Model Based On Small business hiring plans, WTI crude oil prices, USD index and last year’s core CPI reading, is anticipating the highest core CPI rate since late 2000

Today the Fed hiked the Fed Funds rate by .25% and also updated their policy statement and the so called dot plot, which is a compilation of the FOMC members projections’ for GDP growth, unemployment and prices. The interesting feature of today’s policy move was not the rise in rates – that was widely expected – but rather a nod that inflation could move higher in the coming months and also a dot plot that reflected a slight increase in projected inflation in each 2019 and 2020. But, is the Fed expecting enough inflation? Our own inflation regression model, which admittedly predicts core consumer price inflation rather than the Fed’s preferred gauge of core personal consumption expenditure, suggests a more brisk inflation scenario than the Fed’s baseline projections. Our model, which uses small business hiring plans, WTI crude oil prices, the US dollar index and last year’s core CPI reading, is anticipating the highest core CPI rate since late 2000. Now, we are hopeful the Fed’s models are more accurate than our own and prices will settle at a level consistent with Fed expectations, but there does appear to be upside risk to inflation, at least relative to the Fed’s baseline.

Michael Mauboussin: Here’s what active managers can do

michael mauboussin, Credit Suisse, valuation and portfolio positioning, capital markets theory, competitive strategy analysis, decision making, skill versus luck, value investing, Legg Mason, The Success Equation, Think Twice: Harnessing the Power of Counterintuition, analysts, behavioral finance, More Than You Know: Finding Financial Wisdom in Unconventional Places, academics , valuewalkThe debate over active versus passive management continues as trends show the ongoing shift from active into passive funds. Q2 2020 hedge fund letters, conferences and more At the Morningstar Investment Conference, Michael Mauboussin of Counterpoint Global argued that the rise of index funds has made it more difficult to be an active manager. Drawing Read More

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