Tomorrow, we get US CPI, which is likely headed into strong territory based on our cyclical model. Our cyclical model does a good job of getting the medium-term trend right more than the exact print:

Indeed, this expectation is in line with what a range of market-based indicators is pointing to:

We see further evidence of this from the recent acceleration in ISM prices paid, which gives us an indication of the coming CPI print:

Overall, we are likely in an accelerating inflation environment, a move which we think is priced in across many markets. A strong CPI print will just confirm the reflation story. However, as we’ve written about recently, we need to start thinking more about fading reflation trades. Our preferred gauge of US reflation- the US stock market- remains elevated relative to our trading ranges:

At this junction, either our trading range will shift upwards to accommodate recent strength, or the S&P will correct. We’re definitely waiting and watching to see how this evolves. Markets are at an important junction.