Oct 14, 2022
The US CPI data came in stronger than expected and gives the Fed further comfort in maintaining or even reinforcing its hawkish course. With core prices (ex volatile energy and food) rising 6.6% in September, the fastest in 40 years, we expected a fall in US equities on the news. Mr Market engineered however a 180° turn and finished the session up 5.6% from the intraday low. Why ? We read that algo’s, technicals, quants, overly bearish positioning and even the UK government U-turn on its big tax cuts are behind the jump. As long-term investors, we believe however it is a futile exercise to predict and explain short term market moves. We maintain our prudent and defensive stance investing only into quality undervalued businesses that continue to produce cash flows in an inflationary environment.