by Cullen Roche, Pragmatic Capitalism
Another interesting divergence here via Societe Generale research. Ā Like the commodity trend, weāre seeing a big divergence in US inflation expectations and the S&P 500. Ā If deflation is truly a big risk then thereās an awful lot of faith being placed in the Fedās hands at present through QE. Ā Me, Iām more in the low inflation camp as opposed to the deflation camp, but itās hard to ignore these divergencesā¦.
Hereās more via SG:
- While the S&P 500 is up 17% YTD, equity inflation is not in sync with the US economy, where inflation expectations fell below 2.3% to reach an 8-month low.
- Inflation has been sinking in the eurozone at an accelerated pace in the past few months, reaching a 3-year low of 1.2% in April
- Inflation has been trending down in many countries, including China where inflation accelerated a mere 2.4% in April 2013.
Chart via Orcam Investment Research: