Strategy Note /


  • Cross asset market action resembles the jagged edge of a saw - moreover, it can bloody one quickly as seen recently

  • We continue to trod the "middle path" between ever higher inflation & recession though it feels like waiting for Godot

  • Relative strength is becoming apparent- non US equity, Credit, broad Commodities, even the Innovation space is bottoming

Jay Pelosky
Jay Pelosky

TPW Founder & Global Strategist

TPW Advisory
10 June 2022
Published by

Sawtooth: shaped like the teeth of a saw; a sawtooth wave ramps upward and then sharply drops. That seems like a pretty apt description of current cross asset market action - from stocks to bonds, fx to commodities.  

Sawtooth was the word I hit upon when thinking at breakfast about what to write today. Obviously the big focus is the US CPI print which came in slightly above consensus as goods inflation hands off to service inflation. Importantly, Pantheon Macro reports that at 6%y/y, core inflation hit a four month low - sawtooth. For all the talk about it being highest inflation print in 40 years, when I looked at a chart of inflation stretching back to that time point what stood out was how quickly inflation rolled over once it peaked, falling all the way back to 2.5%.


A sawtooth market is a frustrating market and that is clearly the case today. Waiting for inflation to peak and roll over have proven to be like waiting for Godot. This month it was food, fuel and rent – no real surprises though the double digit jump in airfares for the 2nd month in a row, 3 month annualized at 376%, really struck me for two reason. One, the price of jet fuel has fallen 40% + since its early April peak and two, the performance of the JETS ETF has been less than stellar, roughly flat since early March.


There remains a rationale for expecting inflation to soften – partly driven by the likelihood that huge price increases like airline fares are not sustainable, coupled with supply chain easing, the softening of the labor market, the peak in AHE & the sharp drop in housing. As an inflation bull, it has been a frustrating and painful wait.