Credit suite expects inflation collapse, “powerful market rally”

Credit Suisse chief US equity strategist Jonathan Golub recently wrote:

“Futures indicate that Food and Energy prices should fall -5.7% and -11.8% by year end 2023, while Goods inflation has declined from 12.3% to 7.0% since February.

Over the past year, Services and Rents are up less than Headline CPI (5.5% and 5.8% vs. 8.5%)."

Golub expects signs of an inflation breakdown will force the Fed to stop hiking rates. His time frame: Over the next four to six months.

"The market believes that come the first quarter, if we continue to go on this glide path where things renormalize, that they're going to either pause or signal that they might pause," he said. "If they do that the stock market wants to move ahead of it. The stock market is really going to take off."

Editors note: Golub is joining a choir of voices that expects year over year inflation to fall sharply. The prices of everything shot upwards in 2021/2022, but appear to have leveled off in recent months.

If monthly inflation readings stay flat (or fall), year over year inflation readings will naturally tick downwards as the 12-month-prior baseline prices move upwards.