Don’t Short Coffee — You’ll Get Burned
Year end positioning and projections.
Inflation’s Next Move — and What It Means for Year-End
CPI came in at 2.7% YOY this morning — a touch softer than expected — and bond yields tried to rally over the last few days but remain stuck in their range. The market’s now pricing an 86% probability of a September 17th rate cut.
The problem? It’s for the wrong reasons. Traders see a soft CPI and think the door is opening for an aggressive easing cycle. But our models point to something different: inflation is set to accelerate into year end.
That acceleration changes the entire playbook. It puts continued pressure on the U.S. dollar, which has already shown signs of weakening. A softer dollar is fuel for international equities, many of which have been shrugging off every U.S. pullback. And it’s a tailwind for commodities, from precious metals to industrials — the very areas already showing leadership in our Macro Trend Finder scans.
If the Fed cuts in September, it’s far more likely to be a “one and done” move than the start of the deep easing cycle the market’s pricing in. That means chasing garbage assets that require multiple cuts to perform is still premature.
Instead, the opportunity is in hard assets, global cyclicals, and international equity leadership — the areas most likely to benefit from the macro tailwinds that accelerating inflation will bring.
Coffee — A False Breakdown in the Making
Everything we’ve been discussing — accelerating inflation into year-end, pressure on the dollar, and a tailwind for commodities — sets the stage for one of my favorite setups right now: coffee.