As we discussed yesterday, nothing has had more influence on stocks over the past sixteen months than inflation, and the fears over a draconian Fed response to it.
On that note, we looked at the trajectory of U.S. CPI earlier this week. By June, prices will be measured against a higher base (of the year prior), and that should deliver us a year-over-year inflation number in the mid 3s (percent), if not in the high 2% area.
This trajectory of U.S. inflation aligns with the producer prices, reported from China overnight. As you can see in the chart below, the rate-of-change in producer prices has crashed into deflationary territory.