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* FIEND'S SUPERBEAR MARKET
REPORT *
* September 10,
2025 *
* *
* e-mail:
fiendbear@fiendbear.com
*
* web address:
http://www.fiendbear.com
*
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Fiend Commentary
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The
Producer Price Index arrived more or less as expected, but the message is
unchanged: inflation is not at 2%, and it isn’t getting there anytime soon.
That hasn’t stopped the market from pricing in more cuts, with the Fed set to
ease even as stocks sit at record highs, gold trades at all-time highs, and the
dollar slides toward recent lows.
The
dilemma is obvious. The labor market revisions forced the Fed’s hand, but
cutting into strength — with equities and commodities surging — raises a deeper
question: is the 2% inflation target still meaningful, or has it quietly been
abandoned?
Targets
work only if they are credible. For years, 2% was treated as sacred. Yet now
the Fed is preparing to add liquidity with inflation still well above that
line, and with financial markets behaving as though the target doesn’t exist. A
weak dollar, record asset prices, and persistent inflation are all signals that
markets have already decided the 2% era is over.
That
leaves the Fed with two unpalatable choices. Stick to the target and risk
pushing the economy deeper into a slowdown, or drift away from it and admit
that 3% or 4% inflation is the new normal. Both paths carry costs — credibility
on one hand, stability on the other.
The
real danger is pretending the choice doesn’t exist. History shows that once
inflation targets lose credibility, getting them back is nearly impossible. The
market is cheering rate cuts today, but it may soon have to confront the
reality that the old anchor of 2% has slipped away. And without that anchor,
the seas ahead could be rougher than anyone expects.
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