Here is my monthly inflation update. We continue along in the same pattern. This month, there was a bit of a bump in non-shelter inflation, but the trailing 12-month rate remains about 1.1% and shelter inflation remains about 3.4%.
Going forward, I think inflation may become a less important indicator. The Fed has shifted to a more dovish posture, and they are not insisting on holding the target rate at a plateau. It would be a shock if they don't lower rates this month. So, I am happy to say that my worst fears appear not to have come to pass. Monetary policy is on the margin of neutral. Unless the Fed reverses course, I suspect there will either be a slight contraction or a continuation of the expansion. For now, I will call that a tentative prediction, but it seems to be where we have moved.
We are probably near the point in time where a tactical long position in fixed income should shift into more of a long position in equities and real estate, either now or over a few months as this plays out.
In terms of broader influences, I'm more worried about nominal growth rates in Australia and Canada than things like the tariff issue, but I'm no expert on those issues. That's just my hunch.
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