CBRE loses both Tony and Bryan in the same week and its stock falls off a cliff? Coincidence? Happenstance?
As much as Tony/Bryan wish they had that kind of influence on CBRE’s stock price, the truth is that CBRE got swept up in the SaaSpocalypse last week (AI and the SaaSpocalypse).
But like all good brokers, never let the facts interfere with a good story. I can almost hear Bryan arguing that the forward multiple of leadership is a real thing…
Last Week This Morning
- 10T: 4.04%
- 2T: 3.41%
- SOFR: 3.65%
- Term SOFR: 3.66%
- Retail Sales m/m: 0.0% vs 0.4% expected
- Non Farm Payrolls: 130k vs 65k expected
- Unemployment Rate: 4.3% vs 4.4% expected
- CPI a little better than expected
Jobs
I sent out a special email blast on Wednesday following the jobs data (Jobs Report Special), so I won’t rehash the whole thing. Three main thoughts bouncing around in my noggin this weekend:
- I am stunned at how everyone reacted so positively to this number. Not only do we have a track record of huge monthly revisions, and not only is January notoriously noisy, but last year’s monthly job gain was revised down from 49k to 15k.
- As my buddy Matt in Miami pointed out, the jobs continue to come from just healthcare and social services. Every other sector is losing jobs.
- Small businesses shed 30k jobs last month, the fifth month in a row of job losses.
The unemployment rate actually dropped back to 4.3%, so maybe the labor market is finding an equilibrium after years of cooling off. But the margin for error is zilch.
Inflation
On Friday, inflation came in a little bit better than expected. Headline CPI came in at 2.4%, down from last month’s 2.7%. This is usually about 0.5% above Core PCE, so an argument could be made that the Fed is basically right on track for 2% inflation.
Just as importantly, it should continue to head lower. The Shelter Component is likely to push CPI down by another 0.2% over the course of this year.
Stripe Chief Economist Ernie Tedeschi pointed out that inflation is largely back to pre-pandemic levels. Any January heat is from tariffs, which the Fed is more likely to overlook.
I’ve long used more modern measures of inflation to sanity check the official government numbers, which have a terrible lag. My two favorites are Truflation and the Penn State Alternative Inflation Index.
Truflation is < 1.0%. That’s not a typo.
Penn State’s Alternative Inflation Index is at 1.3%.
Even if the truth lies somewhere in between, it’s clear the Fed shouldn’t be overly focused on inflation.
Bloomberg’s Anna Wong even pointed out that Dallas is experiencing outright deflation.
She also noted that prescription drug prices are falling off a cliff.
Rates
Given my view that the labor market is wobbling coupled with continued disinflationary pressures, I still think the Fed cuts 1.0% this year.
The market has two cuts priced in, with a third cut more of a coin toss.
On the long end of the curve, there’s been a flight to safety that has driven the T10 back down towards 4%. JPM’s Treasury Client Survey show a growing net long position in Treasurys.
I don’t think the T10 drives below 4% without substantial weakness in the labor market, but at least it’s not surging through 4.5%
The Week Ahead
GDP on Friday should show Q4 was very strong, likely around 3%. This is especially notable because it comes in the face of the shutdown. Q1 is looking just as strong. Everything hinges on the labor market.
Congrats to the Seahawks. Thank you for exposing the Pats, who have no business being this good already.
