SHOP
Was +10% for the week and has now hit our TP1 of $175 (~+40% 1M), and is now +56% since we first initiated a position in the stock in early March at $114.50. The stock is being driven by tailwinds from Agentic commerce / Meta's Muse partnership with Shop Pay, which we expect to persist.

Welcome to the most critical 48 hours of the month for macro markets.

After months of shifting focus to the labour market, inflation is back in the spotlight. Over the next two days, we get back-to-back readings on consumer and producer prices that will either validate the market's current path or force a sudden repricing of Federal Reserve rate expectations.

Here is your breakdown of what to watch and how markets are positioning for the CPI and PPI prints.

The Consumer Price Index (CPI) remains the market's most closely watched inflation gauge. While the Fed officially prefers the PCE deflator, CPI prints move markets faster and more aggressively.

The Headline vs. Core Divergence: As always, strip out food and energy. Energy prices have been volatile, meaning headline CPI might jump around, but the Fed will be laser-focused on the "Core" number.

The Services Problem: Watch the "supercore" metrics (services excluding housing). Shelter costs have been notoriously slow to reflect real-time rent cooling, but if services inflation remains sticky, it will set off alarm bells that the last mile of inflation will be a grind.

The Setup: Markets are priced for a "Goldilocks" print, cooling enough to keep rate cuts on the table, but not so cold it screams recession. A hotter-than-expected Core CPI will immediately send short-term Treasury yields spiking.

The Inflation Pipeline

Thursday morning brings the Producer Price Index (PPI), which measures inflation at the wholesale level. Think of PPI as the pipeline: what producers pay today, consumers usually pay tomorrow.

Leading Indicators: PPI is crucial because several of its components (such as portfolio management, healthcare, and airfares) feed directly into the Fed's preferred PCE metric.

Margin Squeeze vs. Pricing Power: If PPI comes in hot while CPI cools, it suggests producers are absorbing higher costs, squeezing corporate profit margins. If both are hot, it means companies still have the pricing power to pass costs on to consumers.

How will assets react? It all comes down to how these prints alter the Fed's trajectory.

The Reaction: The worst-case scenario for equities. A sudden realization that inflation isn't defeated would force the market to price out future rate cuts. Expect a sharp selloff in tech and growth stocks, a rally in the US Dollar, and a higher 2-Year Treasury yield.

The Reaction: Risk-on. If both metrics show inflation continuing its slow glide path down to 2%, the "soft landing" narrative gets a massive boost. Equities catch a bid, small caps rally on lower borrowing costs, and the yield curve steepens in a normal fashion.

The Reaction: A deflationary shock isn't necessarily good news anymore. If the prints come in shockingly low, markets may pivot from cheering lower inflation to panicking about a recession. Bonds would rally aggressively (yields would fall), but equities might sell off amid growth fears.

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