- Finsights
- Posts
- Where Egg-xactly is the Disinflation?
🔮 Welcome back to Finsights, fellow financial wizard. We're here to spill the beans on the juiciest stock market scoop, breaking it down in a language even your pet goldfish would get!
Price drops egg-ceed our egg-spectations 💵
🏦 Banks may be winning again...
Fed meet is tomorrow…pause incoming?
The most important themes of the day.
Inflation is in - stocking season is here!
👇🍳 Lower than egg-spected. As discussed in past newsletters, disinflation is upon us and prices are falling. The biggest shocker? Egg prices are down a whopping -13.8% compared to last year. Remember last year when egg prices were going crazy? While egg producers did face some issues (Avian flu and higher grain / input prices), the fact of the matter is that we didn’t care. Americans bought the eggs anyway.
Egg prices are coming down fast Egg prices may be down 44% from peak levels earlier in the year, they are still up a whopping +50% from levels that we saw a year ago. There is still more progress to go, but hey, it’s better than nothing right? It’s still much better than our egg-spectations. 🥚
Overall inflation is slowing down too. Headline inflation slowed to +4.0% in May compared to Wall Street’s expectation of +4.1%. This is well below the +4.9% inflation that we saw in April.
What about everything else? We don’t expect you to be eating just a ration of eggs from Costco every day. Meats, poultry, fish, and eggs combined decreased by -1.2% in May. Nice – dinner just got cheaper. Furniture and airfare also got cheaper. But other components such as shelter, used cars, car insurance, apparel, and personal care were up. The silver lining here is these categories are also starting to show deflationary pressures.
The Fed can relax now - While +4.0% inflation is still too high for the Fed, the increasing disinflation that we are seeing across prices can allow the Fed to at least pause on rate hikes for now. 🥵
The Finsight 🐻 📉: Beware of investing in companies that get hurt from falling prices. Grocery stores ($KR and $ACI) and furniture stores ($WSM) are standout candidates to avoid.
Big banks continue feasting on small banks
Deposit beta / Remember when we told you yesterday that smaller banks were feeling the pain from higher deposit betas? Well it’s not just money market funds that are benefitting. Big banks are also benefitting. 💵 🏦
Wells Fargo aka “Wins Fargo”, one of the country’s biggest banks, today said that they still feel very comfortable about their net interest income guidance. As a matter of fact, they see a little bit of upside to their outlook. In a nutshell, this just means that Wells Fargo can keep their checking account interest rates at 0.01%, and nobody, including you, are going to move your money away. People are spooked by the bank runs. And they’re willing to give up the juicier returns to have a bit of certainty.
Wells Fargo is underscoring the fact that America’s biggest banks (like BAC, C, JPM, and WFC) all enjoy a significant advantage on deposit pricing vs. the rest of the industry. Simply put, when Americans take some money out of their local credit union, some of it goes into money market funds, but some of the money ends up with the country’s 4 largest banks. Talk about the strong getting stronger.
The Finsight 🐻 📉: Same as yesterday. Cash sitting around? Swap that 0.01% Wells Fargo interest rate for for Vanguard’s low-cost’s VMFXX’s money market fund. Directly purchase in your brokerage account and it yields 5.03%.
Chatter on the Street.
“The consumer is really resilient and across the globe...the consumer is very resilient so far, even in uncertain times...”
“I think the view that the downturn could be more mild is now actually being discounted in the market. The market has not been right about discounting a lot of macro scenarios in the last few years, but they might have this one right, but only time will tell"
“Today, we took another significant step forward in our data center strategy as we expanded our 4th Gen EPYC™ processor family with new leadership solutions for cloud and technical computing workloads and announced new public instances and internal deployments with the largest cloud providers”
🔮 With Finsights, you get Wall Street wisdom delivered straight to your pocket and explained like a normal person. Subscribe today and spread the wealth by forwarding this email to a friend who deserves it.
Fin-specto Revelio!