Inflation Numbers Are Mixed, Big-Time

The Smart Way to Play These Mixed Inflation Signals

by Blake Young

We've been talking a lot about inflation, and this week gave us even more to chew on in terms of CPI and PPI seeming to show a slowdown - disinflation. The textbooks will tell you that disinflation happens when inflation is still running positive but is compressing and slowing down.

The data is a classic mixed bag; month over month, CPI is down, but it actually rose for the year, from 2.3% to 2.5%. That was cooler than the expected 2.5%, but it's still undeniably climbing.

These "sort-of-but-not-really" declines are happening against a backdrop of increasing energy prices - the XLE enery ETF is up nearly 5% in the past five days, though it's still slightly negative for the year. Oil prices are off their lows and breaking through key levels.

We're going to look at CPI, PPI and how oil plays into all of this in just a few.

Short-sighted traders see the short-term disinflation and think: "Great, more fuel for the rate cut argument." But the big-picture data just doesn't support a cut now or in the immediate future. The market at large isn't pricing in cuts right now, either.

So you might take all of this in and think to yourself, "Great - mixed signals. How do we thread the needle here?"

We're going to talk about that tonight, including the best defensive sectors to get into. Let's get going...

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