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It doesn’t matter until it does but something we should continue to acknowledge and be aware of from a short term trading and contrarian perspective. That is the ever rising bullish sentiment that continues to get more extreme. The updated Citi Panic/Euphoria index rose to .62 w/o/w from .58 in the week before. It's now about 50% above the Euphoria threshold and above the previous July peak. Again, Citi claims that above .41 is statistically significant in terms of the one year performance from here.

Ahead of the inflation stats this week, on Friday the Manheim used vehicle index measuring wholesale prices for November rose to the highest level since October 2023, up by 2.6% sequentially but flattish y/o/y. Manheim said "Wholesale values gave back a little bit of the strength we saw earlier in the month but depreciated less than what we normally see in November...tight supply in wholesale and retail markets will support healthy dealer demand through the final month of the year." Something to watch after the disinflation in goods prices we've seen. You've heard me say many times that with still below pre Covid trends in the sale of new cars means less used cars eventually in terms of supply.

Manheim Used Car Index

As we get closer to the holidays, air cargo rates continue higher. World ACD on Friday said "Worldwide air cargo rates rose to a 2024 high in November of US$ 2.76 per kilo, despite a slight (-2%) drop in flown tonnages compared with October." Average worldwide rates rose 6% m/o/m and are up 11% y/o/y. That combines both spot and contracted rates. As for spot rates, they are up 21% y/o/y and contract rates are higher by 10% y/o/y.

An update too on container shipping costs, the Shanghai to Rotterdam route saw a 20% w/o/w jump as of 12/5 to $4,775. While that is well off its summer high, it is up from $1,667 to start the year. In contrast, the Shanghai to LA route saw prices fell for a 5^th straight week to $3,719 but compares with $2,100 at the beginning of the year.

I'll finish on transportation costs by looking at the updated Dry Van per mile rate as of yesterday and that stands just below the highest level since July at $1.67. That is up 3.7% y/o/y.

Bottom line, the path to a sustainable, and I emphasize 'sustainable', path to 2% inflation will not be easy. Yes, slower rents should keep a lid on services inflation in 2025 but on the other hand the CPI/PCE calculations never fully captured the spike in rents. We then watch, in part due to the things mentioned above, whether goods prices are bottoming.