Every week I’ll provide updates on the latest trends in cloud software companies. Follow along to stay up to date! Inflation Update This week software stocks shot up on lighter than expected inflation figures for October. The lighter inflation gave more credibility to those who argue rates will end up coming down faster than expectations. After the inflation figures came out, the 10Y dropped from ~4.7% to closer to 4.4% today. There’s generally two reasons rates will fall: 1) A belief inflation is falling and higher rates are no longer needed to curb inflation back to the 2% target. 2) Economic growth slowing (ie recession) and rates need to be lowered to stimulate the economy. While rates going lower are generally good for software valuations, in scenario 2 the headwinds of a recession probably outweigh the tailwinds of a recession. Right after the inflation print the market was singing the “inflation coming down with a soft landing!” song. There has been incremental data that suggests the “strength of the consumer” might not be as strong. Walmart missed their guide and saw their stock drop ~10%. They gave us a soft warning on the “strength of the consumer”:
Clouded Judgement 11.17.23 - Inflation Comes in Light
Great post Jamin! I always appreciate your insight. Have a great Thanksgiving.