On the benchmark 10Y treasury rate front, as of right now we are down more than half a point from the recent high of 3.48, down to 2.94 now.
For inflation, lots of price spikes seems to be receding. The first was actually lumbar, which peaked first in 2021 and is now down more than half.
Used cars appear to be on their way down after at one point being up 40% YoY.
Graphics cards are back to MSRP after selling for 2.5x MSRP for a while. Graphics cards are about 1/3 the cost of video game consoles and upper-midrange PCs, so these too will lose inflation pressure.
As I noted here, I got lucky and purchased a card for $300 right before the spike. The used value of that card peaked around $850 on ebay, probably ~$1000 new. I ended up getting a new PC on ebay that a bitcoin miner purchased solely for its graphics card, which he removed from the PC and then resold without the card. I combined the stripped grey marketish new PC with my existing card and am happy with the result.
While rents and energy will continue to rise in my view, I highly doubt their increases will be as fast as in 2021, though as a landlord with a lot of oil stocks, this is a real statement against interest.
Also relevant to inflation are retail margins. Retailers keep reporting they are completely overstuffed with inventory, having over-ordered in reaction to supply chain disruption shortages they had in 2020 and early 2021. They will be discounting much more than normal going forward. Consumer spending is dropping too.
So retailers will have to lower prices, and will be more selective and stingy in purchasing new inventory. Sounds deflationary!
Tech layoffs are gearing up and should put a lid on tech salaries.
In terms of market expectations, amazing the long-term market expectations of inflation via TIPS is about 2.5% going far into the future. That’s not a bad guess in my view. I think we’ll be above that for a couple years, but very long term I see Japan-style demographic changes in the USA leading to Japan-style 0-1.5% long term inflation.
