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14 November 2022.

Well, that was a day! A better-than-expected U.S. CPI (inflation) print kicked off the largest one-day rally the market has seen since the 2020 pandemic bear. S&P 500 +5.5%, NASDAQ +7.3%, TSX +3.3% … hell, even bonds +2.9%. For the S&P 500, this was the 15th biggest one-day gain measuring back to 1950. What makes it more impressive is most big days for the market come right after a terribly painful few days. For instance, in October ’87, there was a +9% day, but the market was down 21% over the previous few days, which was kind of bittersweet. The list of these kinds of bounces is long. Yesterday, the market was down over the previous few sessions but only a bit. Anyhoo, it was a great day to be an investor in the markets and not in cash or GICs.

At the root of this bear market is inflation, so finally, a sign of improving inflation has a very strong market response. Especially given the preponderance of negative news over the past few months, the market is kind of like a spring sometimes. Inflation starting to come down was always a ‘when,’ not an ‘if,’ and that CPI report did carry a lot of good news. Food inflation came down, which is nice. Core inflation, ex food & energy, was 0.3% for the month, which was below the 0.5% expected and below the 0.6% from last month. There was a decent amount of good news – rent inflation slowed, while outright price drops were evident in clothes, car prices, airfares and durable goods in general. Lodging away from home (aka hotels) was up a lot. Overall, a good report.