by Scott Martindale
  CEO, Sabrient Systems LLC
 

Quick note: Sabrient’s Q4 2026 Baker’s Dozen just launched on 10/20 as a 15-month portfolio with a diverse mix of 13 concentrated stock picks across market caps and 7 business sectors. The Q3 2025 Baker’s Dozen just terminated on 10/20 with an official 15-month gross total return of +33% vs. +24% for SPY. Its top performer was Valero Energy (VLO) at +197%.

Commentary:

This is a brief update to my 10/6 post, taking into account the latest CPI and PPI inflation readings ahead of next week’s FOMC meeting and rate decision. September inflation metrics came in a bit hot, as expected, suggesting that inflationary pressures reaccelerated during the month. Of course, it was driven primarily by surging energy prices. There was a slight uptick in core inflation as well, but it comes with important caveats that I will discuss. Overall, I continue to strongly urge against rate hikes, as many small businesses, hopeful first-time homebuyers, and lower-income and working-class families continue to struggle under the weight of elevated interest rates.

In fact, I continue to believe the Fed would be better advised to cut its policy rate, which would allow a broader swath of the economy to participate in and contribute to a more robust and broad-based economy. I also opined in my 10/6 post that bonds were likely seeing a “blowoff top” and nearing a cycle peak. Today’s market action seems to finally show some agreement with me, with a huge bid for bonds sending the 10-year yield crashing to well below 5% for the first time since 9/22 in its biggest one-day drop in over two years, and the 30-year mortgage rate turning lower this week for the first time since late August.

The inflation conundrum:

Headline CPI rose 0.6% MoM and 3.72% YoY, up from August’s 0.4% MoM and 3.35% YoY. Gasoline prices jumped by 9.1% MoM, accounting for over half the monthly increase, and a staggering 34.2% YoY, while the broader energy index surged 5.2% MoM and 20.4% YoY. Airfares were up 22.4% YoY. At least food prices were unchanged MoM. But the more troubling report came from producer prices. Headline PPI surged 1.3% MoM and 6.35% YoY, its largest monthly increase since March 2022 and highest annual reading since December 2022. Producer goods prices jumped 2.6%, led by a 10.8% surge in energy prices, including a 20.3% spike in gasoline. Services prices also increased 0.8%, reflecting higher transportation costs and wholesale margins. Importantly, Core PPI (excluding food, energy, and trade services) rose 0.5% MoM and 5.0% YoY. However, as illustrated in the chart below, PPI is more volatile than the consumer metrics, so perhaps hope is not lost. Read on...