This Wednesday, the Bureau of Labor Statistics will post inflation data for December 2024. The chances are high that inflation either stayed at current elevated levels or increased. After the BLS posted strong job growth in December, the markets will continue to worry. The Fed will not cut interest rates again in its next meeting, as hoped for last month.
The U.S. 10-year Treasury yield (IEF) jumped to as high as 4.77%, just two basis points from its 52-week high. The 30-year Treasury yield (TLT) was 5.01% last Friday before closing at 4.95%. The bond market is ignoring the Fed’s interest rate cuts. Mortgage rates rose in response to the higher bond yields. If the bond market is right, inflation will accelerate in 2025.
Trump’s tariffs are a catalyst for higher inflation. Producers will pass tariffs imposed by America’s trade partners. Stock markets are pricing a downtrend in the demand for big-ticket items. Automotive firms like Ford Motor (F) and General Motors (GM) are on a downtrend. Conversely, American Airlines (AAL) closed at a 52-week high.
Energy deflation lowered the cost of travel, helping airlines.
Consumers will continue to avoid luxury goods. Estee Lauder (EL) is still trading near a 52-week low. Elf Beauty (ELF) and Ulta Beauty (ULTA) bounced back. Their rebound may end if inflation increases again last month.