Market Review: November 12, 2023

The NY Fed’s 1-Year Consumer Inflation Expectations for October decreased to 2.90% from 3.00%, indicating a slight easing in anticipated inflation. This adjustment suggests that consumers expect inflation to remain moderate in the short term, potentially reducing the urgency for immediate Fed tightening. Lower inflation expectations may also reduce demand for inflation hedges, including gold, while supporting equities by reinforcing a stable outlook for borrowing costs.

Impact Analysis:



• USD Impact:
  The slight drop in 1-Year Inflation Expectations may exert mild bearish pressure on the USD, as it signals lower anticipated inflation, which could reduce the need for rapid Fed rate adjustments. With inflationary pressures appearing contained, the dollar may see less speculative support from inflation-driven tightening expectations.

• Gold Impact:
  Lower consumer inflation expectations tend to be mildly bearish for gold, as they reduce the appeal of gold as an inflation hedge. This data suggests reduced near-term inflationary pressures, which can prompt investors to seek higher-yielding assets rather than holding gold.

• Equities Futures Impact:
  Equities may respond positively to the lower inflation expectations, as this signals stability in the cost environment, supporting consumer confidence and spending power. Additionally, the reduced inflation outlook implies a more predictable interest rate environment, favorable for growth-sensitive equities.

Today’s data points to a stable short-term inflation outlook, with consumers anticipating moderate price pressures over the next year. This environment supports a cautious but optimistic view for equities, while reducing some inflation-driven demand for USD and gold. Investors may interpret this as a sign of economic steadiness, encouraging risk-taking in equities.