While bitcoin and stocks are cheering Tuesday's softer-than-expected U.S. consumer price index print, one expert suggests slowing inflation is not a reason to buy risk assets.
The data, which strengthen expectations for a slowdown in the Federal Reserve's interest-rate increase path and a pivot to liquidity easing in second-half 2023, lifted risk assets. Bitcoin jumped over 3% to $18,000 following the CPI release, the highest since Nov. 10, CoinDesk data show. The S&P 500 gained 0.7%, while the dollar index dropped to a six-month low.
"Those who find a lower inflation print a good opportunity to buy risk assets should look away now," Andreas Steno Larsen, founder and CEO of Steno Research,in the inflation review published Tuesday."Remember that the PPI is a leading indicator for EPS ... And if we allow the oil future to predict PPI, then we are in for negative EPS growth already during Q2/Q3-2023."
The chart shows corporate profitability, as measured by EPS, tends to closely follow PPI, which is likely to turn negative in the second quarter of 2023.
AndreasSteno godbole17 Inflation is a key factor in DeFi, and this research is insightful. It's clear that the crypto markets need to factor this in. HODL tight!
AndreasSteno godbole17 The money has been spent and hence inflation will inevitably continue
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