Consumer Price Index Rose 0.4% In September

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In his podcast addressing the markets today, Louis Navellier offered the following commentary.

If you wish to listen to this commentary, please click here.

Alarming CPI

On Thursday, the Labor Department announced that its Consumer Price Index (CPI) rose 0.4% in September and 8.2% in the past 12 months. The core CPI, excluding food and energy, rose 0.6% in September and 6.6% in the past 12 months.

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In August, the core CPI was running at a 6.3% annual pace, so the acceleration in the core rate of inflation to a 6.6% annual pace, which represents the highest core inflation in 40 years (since August 1982) is very alarming.

Owners’ Equivalent Rent rose 0.8% in September, so high housing costs are part of the core inflation problem. Another problem is that car insurance rose 1.6% in September, so core inflation is now imbedded in service costs.

Gasoline prices declined 4.9% in September, while natural gas prices rose 2.9%. Overall energy costs declined 2.1% in September, while food prices rose 0.8%.

In summary, the September CPI report guarantees that the Fed will continue to raise key interest rates. The only good news from the CPI report is that Social Security benefits will now rise 8.7% in 2023.

Rate Hikes Guaranteed

The latest Federal Open Market Committee (FOMC) minutes were released on Wednesday and revealed that Fed officials were concerned about the persistence of high inflation. As a result, a 0.75% key interest rate hike at the November FOMC meeting is virtually certain.

Furthermore, another key interest rate hike of 0.5% to 0.75% at the December FOMC meeting is also likely to get the federal funds rate in line with market rates.

Unemployment to Rise

The Labor Department also announced on Thursday that new claims for unemployment rose to 228,000 in the latest week, up from 219,000 in the previous week. Continuing unemployment claims rose to 1.368 million in the latest week up from a revised 1.365 million in the previous week.

The 4-week moving average of unemployment claims and continuing claims is now starting to rise, so it appears that the unemployment rate will start to rise in the upcoming months.

The good news is new British Prime Minister Liz Truss is now considering a u-turn on her proposed tax cuts to shore up the U.K. gilt yields. British yields have settled back down. In fact, the 10-year British gilt yields are only 4.3%.

I believe the market is going to gap up this morning because the Brits are influencing our markets. In fact, when the Bank of England intervened, it triggered a big short-covering rally in early October. So the Brits have been basically helping financial markets around the world.

We expect energy stocks to continue to be a silver lining, critical path that all investors can follow. Fossil fuel usage is soaring worldwide due to Europe divesting from Russian energy as well as soaring prices for battery components.

I also believe that the Biden administration will stop releasing from the Strategic Petroleum Reserve soon. Additionally, with the OPEC cut that has been announced, it looks like the supply-demand balance is very tight and the big energy bet is going to be paying off.

The market is obsessed with its fear of higher rates. If we step back and look at what is going on, please remember that the market usually takes off within 90 days after the yield curve inverts. That means the October rally was real.

I know that the October rally was a short covering rally the first two days of October, but that's how bear markets end. So, I'm pretty comfortable that the market is washed up and will go higher.

Coffee Beans

Visitors to an In-N-Out Burger fast food restaurant in Las Vegas were treated to an unusual scene when a man brought his camel through the drive-through to enjoy some fries. Fergie is a 14-year-old camel rescued from her former home in Colorado. Fergie has paid visits to numerous local businesses including Wendy's and Einstein Bros Bagels. Source: UPI. See the full story here.