The One Percent
I'm furious with the 1 percent right now.
No, not that one.
This one: the one-year US breakeven rate, a market expectation of inflation, fell below 1 percent on Friday -- a drop of roughly 1.5 percentage points since March. (Bloomberg's interactive graph is available here; below is a snapshot of the last three months.)
This scares me greatly. Given that the inflation volatility represents a demand-side phenomenon right now, the graph is a clear warning that monetary policy is steering the nominal economy off course once again.
As David Glasner shows us with the five-year TIPS spread, which is also falling, it won't be a long time until such demand-side disinflation translates into downward pressure on stocks in the US. The fall in the one-year breakeven is far greater than Glasner's five-year spread, which suggests that we may be sliding into a "soft patch" or slowdown as we write or speak.