CPI is a way of measuring how much things cost over time. In December, the CPI went up by 3.4%, which means that things are getting more expensive. This is mostly because housing costs went up a lot (6.2%). People don't want to sell their houses and move because higher mortgage rates make them pay more money each month. Other prices, like energy and cars, also changed but not as much. Some people think the Federal Reserve will lower interest rates soon to help with high costs. Read from source...

1. The author seems to have a bias towards the Fed and its policy decisions, which is evident from their statement that "the common belief is we’re at the high end of Fed rate hikes for this cycle". This suggests that the author is not impartial in evaluating the impact of the Fed's actions on the economy.
2. The author also makes a weak argument when they say that housing prices have stayed high despite both higher and lower mortgage rates. This statement does not provide any evidence or explanation for why housing prices are still high, and it appears to be an assumption based on their personal experience rather than data-driven analysis.
3. The author's use of the term "shelter" instead of housing is misleading, as it implies that the category includes other forms of shelter such as homeless shelters or temporary accommodations. This could create confusion for readers who are not familiar with the CPI classification system.
4. The author's discussion of energy prices is inconsistent and lacks clarity. They mention that energy prices have been volatile all year, but then they contradict themselves by saying that the multi-month decrease could be normal fluctuation or a sign of an imminent recession. This creates ambiguity for readers who are trying to understand the impact of energy prices on inflation and the economy.
5. The author's use of emotional language such as "despite today’s higher than expected CPI, I agree with this conclusion" shows that they are not objective in their analysis and may be influenced by their personal feelings or opinions rather than facts and data.

Neutral with a slight bearish tilt

Summary: The article discusses the December CPI being 3.4% and provides an analysis of various factors contributing to this increase, such as housing costs, labor market conditions, and inflation expectations. It also touches on the potential impacts of geopolitical events and Fed policy decisions on future economic outcomes.

Analysis: The article presents a balanced view of the current economic situation, acknowledging both positive and negative aspects. However, it seems to lean slightly towards a bearish perspective due to the mention of high inflation, volatility in energy prices, and the possibility of an imminent recession.

- Equities: I recommend staying invested in equities, as the market is pricing in a Fed pivot or pause, which means lower interest rates ahead. Lower rates will boost stock valuations and support earnings growth. However, there are some risks to this strategy, such as higher inflation persisting or worsening, geopolitical tensions escalating, and a possible recession in 2023. Investors should diversify their equity exposure across sectors and regions, and consider factor-based strategies that can help mitigate these risks.
- Fixed income: I recommend avoiding long-term bonds, as they offer poor yield compensation for the duration risk and inflation risk they pose. Instead, investors should focus on short-term or intermediate-term bonds, which can provide some ballast in a rising rate environment while still offering positive real yields. However, be aware that bond prices are sensitive to changes in interest rates, and could decline if the Fed raises rates more than expected or markets anticipate a faster pace of tightening.
- Alternatives: I recommend exploring alternatives such as real estate, commodities, and private equity, which can offer diversification benefits, income generation, and hedging capabilities against inflation and market downturns. However, these assets are also subject to their own idiosyncratic risks, and require expertise and due diligence to identify attractive opportunities and manage them effectively.