The hotter-than-expected U.S. CPI release was the market showstopper last week. Both headline and core inflation came in at 0.4% for the month, and the annual rate for the headline index accelerated to 3.5%. Over the past several years, S&P 500 valuations have closely tracked the rate of inflation (inversely) with about a 3-month lag. Since the peak in CPI, P/Es have risen significantly. This suggests the S&P 500’s valuation may be close to its peak should inflation fail to fall further in the near term. One reason investors are willing to pay higher valuations for stocks when inflation is falling is that they often expect easier monetary policy (i.e., lower interest rates) to follow. That hopeful development seems likely to remain elusive until later this year. Stocks did not react positively to the news on Wednesday morning, and this chart from Chapter 13 of the M2SD clearly shows why.

The Macro Week In Review

Macro Job Board

Macro Valuation Associate @ Point72 (New York)

The Valuation team provides valuations and P&L for investments for portfolio managers, the Risk team, and senior management. You will manage the valuation and models for various products, such as Credit derivatives, interest rate swaps/swaptions, FX derivatives, Government bonds, and Corporate bonds.

Macro Risk Strategist @ Balyasny Asset Management (New York)

The Macro Risk Strategist will work closely with select macro portfolio managers and their teams to understand and analyze their portfolio and risk. They will also develop, maintain, and leverage models for option pricing in order to better quantify unique portfolio risks.

Global Macro Research Credit Associate @ Goldman Sachs (New York)

The Macro Research team focuses on the intersection between economics and financial markets across a wide class of assets including equities, rates, FX, credit, mortgages and commodities. We are seeking an experienced credit strategist to join the Credit Strategy Research team.

Three Things We Read This Weekend

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