Inflation, they think it’s all over
Macro & Overnight
The US stocks rally was short-lived after the lower-than-expected US CPI data.
UK consumer inflation in November ONLY rose 10.7% from a year earlier, down from 11.1% in October. Economists had expected a rate of 10.9%.
US and UK data indicate price growth has peaked and will steadily decrease. Sterling’s appreciation also helps in this regard in the UK.
Reports suggest that Beijing covid cases have surged, swamping hospitals. This situation is worth keeping a close eye on over the holiday period.
“Investors can now potentially get solid returns from credit instruments, meaning they no longer have to rely as heavily on riskier investments to achieve their overall return targets”. This quote from Howard Marks’ latest memo neatly summarises the outlook for the investment landscape he regards as a sea change.
The chart below illustrates the risk of thinking that inflation is now over. We have been here before.

UK Company News
Luxury retailer Watches of Switzerland reported a solid H1 performance reflecting longstanding brand partnerships. Group revenue rose 23% driven by increases in price and volume. Trading in the first six weeks of Q3 is aligned with expectations and recently updated FY23 guidance.
Air quality vendor Volution updated with group revenue up 7%, combining better volume and prices. Strong residential market growth and OEM revenue growth more than offset weaker commercial. All three geographic regions grew organically. The company continues to see regulation drive improvements. It is pleased with its start to the new financial year and its ability to achieve margin targets in the face of inflation.
Cookware vendor Procook reported revenue down 14.5% due to heightened pressures on consumer spending and the long hot summer. Cost pressures impact gross margin, but as it updated recently, it has begun taking action to reduce operating costs by GBP3m annually.
Prognosticator
On this day ...
… in 1812, Napoleon’s invasion of Russia ended after an estimated 530,000 French lives were lost.
NB Prices are as at the previous day’s close.
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