To The Moon

December 2025 core CPI cooled to a crisp 2.6% year-over-year, hitting a four-year low and beating whispers of 2.7%. Headline inflation held steady at 2.7%, with monthly bumps from shelter and food, but used cars and energy dragged it down. Sounds like a win for disinflation, right? 😎 Yet stocks yawned – S&P 500 dipped 0.2%, Dow shed over 400 points, and Nasdaq barely budged. No fireworks, no risk-on frenzy. Why? Because this "soft" print didn't rewrite the Fed's script.

Markets are now locked in: zero cuts in January (95% odds of hold), slim chance in March (under 20%), and June emerging as the real starting line for any easing. But here's the plot twist – big players like JPMorgan are ditching cuts entirely for 2026, predicting a 25bps hike by Q3 2027! 😱 Goldman and Barclays pushed their calls to mid-2026, while UBS sees just one tiny trim in Q1. Bond futures? They're betting on maybe 50-75bps of easing all year, if we're lucky. Tariffs, sticky services inflation (up 2.8% in super-core), and a resilient jobs market (unemployment ticking down) are screaming "higher for longer." If even cooling CPI can't spark a rally, what will? A recession signal? Plunging PCE?

Let's break it down with fresh data as of January 15, 2026:

This table shows disinflation's alive, but not sprinting to the Fed's 2% target. Shelter's still hot (3.2% YoY), and health costs are jumping – hello, expiring subsidies! If tariffs bite harder, expect PCE to flirt with 3%+, forcing the Fed to pause. Professional investors? They're already buying puts and hedging tails: no cuts in 2026, or worse, rates stuck at 3.5-3.75%. Pullback incoming? Absolutely possible – high valuations (S&P at 25x earnings), political noise, and "sell the news" vibes could trigger 5-10% dips.

Would I hedge? Heck yes! 🛡️ Options like VIX calls or inverse ETFs on QQQ could shield against volatility spikes. But don't panic-sell – growth's solid (GDP nowcasts at 2.3%), and if data softens (watch Jan retail sales tomorrow), cuts could sneak back in. For bulls: Rotate to defensives like utilities or gold (up 1% post-CPI). Bears: Short financials if JPM's earnings miss spreads. Bottom line? Markets might be underpricing "higher for longer" – that 2.6% core feels good, but with labor humming and inflation sticky, June's no sure bet. Stay nimble, folks! 📈💥

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