What Today’s Inflation Print Won’t Tell You—But Markets Already Know

Today, the U.S. will release new inflation data, the first likely affected by the Trump tariffs. However, we expect a flat or modestly higher print. Even if inflation comes in above expectations, we don't anticipate a strong reaction from Bitcoin or equities. The tariffs appear to be less impactful than initially feared, with companies possibly hesitant to pass on the costs. Pre-tariff stockpiling ("hamster hoarding") hasn’t driven prices up, and inventories remain ample, limiting inflationary pressure.

Our CPI model closely predicted actual inflation print, except during COVID

On the contrary, the U.S. economy is showing signs of gradual weakening, as reflected in both the ISM manufacturing and non-manufacturing indices. While labor market data is subject to revisions, it hasn't softened enough to confirm the sharp downturn suggested by sentiment surveys. The rebound in equities has lifted consumer confidence. Looking ahead, even weaker data is likely to reignite discussions about stimulus. The quiet shelving of the DOGE initiative signals that fiscal support remains a priority, and Trump has no intention of being remembered as an austerity president.

We believe today’s inflation print will likely be received more positively than expected. It would take a significantly higher-than-anticipated number to unsettle markets—a scenario we view as unlikely. While equities are edging into overbought territory, many hedge funds remain underexposed. Seasonal consolidation is possible, but for the bearish narrative to regain traction, a new catalyst is needed; for instance, tariff headlines are already losing impact.

S&P 500 is +10% higher since the trend model turned bullish on April 23.

Recall Costco’s March 6 warning about inflation dampening consumer spending, which weighed on the S&P 500. However, their May 29 report exceeded expectations, and the stock is now up 10% year-to-date (YTD), compared to just 3% for the S&P 500. This suggests that fears of a collapsing U.S. consumer may be overstated. Rather than hard data being driven by soft sentiment, sentiment may have been unduly influenced by negative media coverage. Underneath, the fundamentals may still be intact.

Conclusion

Markets are more resilient than the headlines suggest, and today’s inflation print is unlikely to change that—unless something truly unexpected hits. Costco has just proven that the U.S. consumer isn’t cracking—don’t bet against the data when it’s starting to push back against the fear. Even if inflation surprises to the upside, we don’t see equities flinching—positioning tells a more bullish story. The soft data slump may be more media-driven than reality-based.