Daybreak Holiday: Inflation Pressure, Markets, Retail
Bloomberg Daybreak: US Edition
Deep Dive
Why has inflation underperformed relative to expectations in 2024?
Inflation has underperformed relative to expectations due to a slowdown in shelter prices and wage growth, which are key components of the inflation basket. Despite initial high levels, core PCE has dropped from nearly 6% to 2.8%, indicating significant progress.
Why does Tom Porcelli think the Fed might be more open to accelerating rate cuts in 2025?
Tom Porcelli believes the Fed could accelerate rate cuts if economic data, particularly payroll and CPI reports, show weaker than expected results. The current volatility in economic reports and the Fed's data dependency make it crucial to remain flexible.
Why does Tom Porcelli think the Fed should focus on both inflation and the labor market?
Tom Porcelli argues that the Fed should focus on both inflation and the labor market because they have a dual mandate. While inflation is important, the labor market is showing signs of slowing down, with the quit rate declining and hiring rates slowing. Ignoring these signs could lead to volatility.
Why is the 2% inflation target still realistic for the Fed according to Tom Porcelli?
Tom Porcelli suggests that while the 2% inflation target is an anchor, it is debatable whether it should be exactly 2.0%. The Fed has committed to this target, but there is room for discussion about whether a range, like the Reserve Bank of Australia's, might be more appropriate.
Why does Lori Calvacina expect a 10% gain in the S&P 500 for 2025?
Lori Calvacina expects a 10% gain in the S&P 500 for 2025 due to continued moderation in inflation, which helps keep PE multiples elevated, and a solid earnings growth backdrop. However, she also anticipates some volatility with potential 5% to 10% drawdowns.
Why does Cameron Dawson see two potential scenarios for the market in 2025?
Cameron Dawson sees two potential scenarios for the market in 2025: a 'talking heads market' with sideways chop, allowing the market to grow into high valuations, or a 'Prince market' with strong returns driven by valuation expansion, followed by a potential bubble and subsequent meltdown.
Why is the earnings backdrop important for the stock market in 2025 according to Lori Calvacina?
Lori Calvacina highlights the importance of the earnings backdrop in 2025, noting that downward guidance, the impact of the dollar, and margin pressures are key factors to watch. Strong margins have supported earnings forecasts, and any weakening could be problematic for stocks.
Why does Cameron Dawson think financial conditions could tighten in 2025?
Cameron Dawson believes financial conditions could tighten in 2025 if the Fed remains relatively hawkish compared to other central banks, leading to a stronger dollar and challenges for companies with overseas revenues. This could feed into risk asset prices and dampen corporate confidence.
Why does Bert Flickinger expect a downturn in retail in 2025?
Bert Flickinger expects a downturn in retail in 2025 due to tepid holiday sales growth, negative restaurant sales, and consumers focusing more on experiences rather than retail purchases. Only food and off-price retailers are performing well, while others are struggling.
Why is providing an experiential retail experience important according to Bert Flickinger?
Bert Flickinger emphasizes that providing an experiential retail experience is crucial, as seen with Target and Kroger's success. Retailers like Saks Fifth Avenue and others that do not invest in experiences are struggling, highlighting the need for investment rather than treating everything as an expense.
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