Cathie Wood Says Inflation Worries Dampen Expectations, Schiff Singles Out Wall Street For Swallowing Narrative Even As Prices Soar

Consumer sentiment faces renewed pressure as inflation expectations hit 3.3% for both short and long-term outlooks, despite December’s core inflation showing signs of moderation at 3.2% year-over-year, below the expected 3.3%.

“The consumer is worried about both short-term inflation expectations over the next year and long-term inflation expectations over the next 3 to 5 years, with both popping to 3.3%,” said Cathie Wood, CEO of Ark Invest, highlighting the impact on consumer expectations.

Inflation rises to 3.3% for both short- and long-term outlooks. Thanks to current economic conditions, consumer sentiment has slightly rebounded, but inflation concerns dampen expectations. @CathieDWood explores the current macroeconomic state in the first "In The Know" of 2025.
— ARK Invest (@ARKInvest) January 15, 2025

The headline Consumer Price Index rose 2.9% year-over-year in December, up from November’s 2.7%, marking the third consecutive monthly increase and the highest rate since July. Energy costs played a significant role, with the index climbing 2.6% and accounting for over 40% of December’s monthly price increases.

Peter Schiff, Chief Economist at Europac, cautioned about underlying economic pressures, noting that “the CRB jumped another 1.6%, reaching a new 17-year high, up 21% in the past four months, while oil spiked almost 4%, closing at $80.41.”

The CRB Commodity Index, currently at 370.7, reached an all-time high of 470.17 in July 2008. This index tracks the price movement of 19 commodities, including aluminum, cocoa, coffee, copper, and more, providing a broad representation of commodity sectors.

On the day Wall Street celebrated a "benign" #inflation report, the CRB jumped another 1.6%, hitting a new 17-year high, up 21% in the past four months, while oil spiked almost 4%, closing at $80.41, a seven-month high. Wall Street believes inflation is low as prices are soaring.
— Peter Schiff (@PeterSchiff) January 15, 2025

Financial markets responded positively to the mixed data, with Treasury yields falling significantly. Mohamed El-Erian, Chief Economic Advisor at Allianz, observed “a significant, across-the-board move down in yields today in the advanced world,” attributing it to better-than-expected U.S. inflation data.

A significant, across-the-board move down in yields today in the advanced world.
It was driven by traders/investors' reaction to better-than-expected inflation data in the US , and with the UK outpacing others given its own inflation data release.#economy #markets pic.twitter.com/jI8mor6T6G
— Mohamed A. El-Erian (@elerianm) January 15, 2025

However, former Treasury Secretary Larry Summers raised concerns about fiscal stability, pointing out that “the 5 year 5 year US Treasury yield has hit 5 percent even as the real yield for the same horizon is above 2.6 percent,” suggesting worries about future budget deficits.

The 5 year 5 year US Treasury yield has just hit 5 percent even as the real yield for the same horizon is above 2.6 percent. This confirms concerns about looming budget deficits and a rising neutral rate.
— Lawrence H. Summers (@LHSummers) January 14, 2025

The SPDR S&P 500 ETF Trust SPY rallied 1.82%, while the Invesco QQQ Trust QQQ gained 2.30%. The Financial Select Sector SPDR Fund XLF led sector gains, rising 2.55% as major banks reported strong fourth-quarter earnings.

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