The market felt relieved after the inflation report yesterday, not because the data was good, simply because it wasn’t worse than expected. CPI grew 2.9% YOY in 2024, and core CPI grew 3.2% over the same period. The data point itself was not bad, but the cumulative effect of inflation is affecting the consumer. A lot. The bond market took a pause as yields (-12 bps on the 10 yr) acknowledged that inflation is not growing on a straight line. As an important side note, big banks (JPM, GS, C) published their earnigns yesterday, and they were good, which pushed the market up. At this point is important to note that the US has two banking realities: big banks with larger, more complex and more diversified revenue sources, and the rest. As you can see below, the top 7 banks account for half the assets in the U.S. banking sector. Those are the ones topping esrnigns estimates. YTD, the US regional banks ETF is up almost 5%, while the small cap financials ETF is down -0.18%. There is concentration also in the banking sector.
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