Commodity check/Fed check/Overseas inflation check/Nike, MKC on the consumer and tariff management

I will be away next week so will be writing sparingly, if at all. 'See' you again full time on July 7th.

Helped by the rise in copper, among other things, the CRB raw industrials index closed at nearly a 3 month high yesterday and looks like its carving out a nice multi year bottoming formation. We still own and find many commodity stocks inexpensive and believe a bull phase is upon us. In the growing multi polar world we've entered, access to the crucial economic building blocks that are commodities is more vital than ever.

As part of this, keep your eye on food prices too as on Wednesday (before a slight pullback yesterday) the CRB Food Stuff index closed at the highest level since August 2023, a near two yr high.

CRB Raw Industrials Index

Copper

CRB Food Stuff index

The divergences within the Fed with regards to the timing of inevitable cuts this year remains still interesting. Voting member Austan Goolsbee seems about ready to cut but voting member Susan Collins, the Boston president, said yesterday "We're only going to have really one more month of data before the July meeting. I expect to want to see more information than that...I am not seeing an urgency...I think that we do have the time to carefully, holistically assess the information. It's too soon to tell whether we might see more persistence in the impact of tariffs on inflation." Voting member Jeff Schmid a few days ago also is not ready to cut, "With all this uncertainty, the current posture of monetary policy, which has been characterized as 'wait and see,' is appropriate. The resilience of the economy gives us the time to observe how prices and the economy develop." And, NY Fed president John Williams on Tuesday said "Maintaining this modestly restrictive stance of monetary policy is entirely appropriate to achieve our maximum employment and price stability goals."

Non voting members Beth Hammack, Neel Kashkari and Raphael Bostic also expressed the desire this week to wait past July to cut.

This of course follows Governor's Waller and Bowman who are both ready to cut now, and likely politicking for the job of Fed Chair, and Powell who we know seems more inclined to wait until September, expressed again this week.

Japan keeps reporting CPI prints above 3%, though the BoJ keeps telling us that underlying inflation is still below 2%, confusing not just me but many market participants. Tokyo CPI in June rose 3.1% y/o/y ex food and energy, though 2 tenths below expectations and down from 3.3% in May. Food prices in particular, at the headline level, remain a problem with rice up 91% y/o/y. While the print was less than expected, the Japanese 10 yr inflation breakeven was higher by 2 bps overnight at 1.52% and JGB yields ticked higher too. The BoJ with its overnight rate at just .50% remains in a tough spot they put themselves in.