BREAKING: September PPI Inflation unexpectedly rises to 6.3%, above expectations of 5.3%. Core PPI Inflation rose to 5.0%, above expectations of 4.4% PPI inflation is now at its second highest level since November 2022. The odds of rate hikes are rising sharply on the news.

Inflation is RED hot in the US. For anyone not keeping track, US CPI inflation is now nearly double the Fed's 2% target and US PPI Inflation is more than triple that target. PPI inflation was expected to fall in August, but instead it surged to 6.3%, its second highest level in 4 years. And, month-over-month Headline PPI inflation surged +1.3%, more than doubling the +0.6% expected and the second largest jump since March 2021. Meanwhile, month-over-month Core PPI inflation came in +133% above expectations. The prices Americans are seeing now will look cheap in 12 to 24 months. All you can do is own assets.

We are witnessing a historic shift. The annual spread between the S&P 500's earnings yield and the 10Y Note yield is down to -1.5 percentage points, its lowest since 2009. Since 2022, this yield difference has fallen -440 basis points, its largest 5-year decline since the 1970s. As a result, the S&P 500's equity risk premium is on track to post its 3rd consecutive negative annual reading, the longest streak since 2002. This suggests that, on a yield basis, theoretically less risky 10Y Treasuries are now more attractive than the S&P 500. In other words, investors are receiving a higher yield from Treasuries than from the S&P 500, despite the additional risk of owning stocks. Historically, a negative equity risk premium has been associated with strong risk appetite and stretched equity valuations. We expect an eventful Q4 ahead.