U.S. CPI skyrockets, global markets "benefit from disaster"? Bank of America Hartnett: Trump's "Achilles' heel" exposed

Under the continuous rising inflation pressure, the U.S. CPI has recently reached a new high.

As the market worries about the resurgence of inflation, Bank of America analyst Michael Hartnett pointed out that this "hot" inflation data may actually allow the bond and stock markets to "benefit from misfortune."

This is because the continuous rise in the U.S. CPI has created a policy "Achilles' heel" for Trump. In the coming months, Trump must engage in "small-scale" actions on tariffs and immigration issues, rather than "big moves," to avoid triggering a second wave of inflation.

"Trump must adopt small-scale tariff and immigration policies to avoid triggering a second wave of inflation."

Meanwhile, Hartnett's analysis indicates that although the Federal Reserve faces the challenge of intensified inflation, the asymmetry of its policies (with rate cuts occurring faster than rate hikes) and the lack of inflation credibility make adjustments to fiscal policy more complex.

Rising Inflation: Market "Benefiting from Misfortune"?

Under the continuous rising inflation pressure, the U.S. CPI has recently reached a new high, attracting widespread market attention.

In January, the U.S. Consumer Price Index (CPI) rose 3% year-on-year, exceeding market expectations. Hartnett believes that this "hot" inflation data may actually be a "blessing" for the bond and stock markets.

He pointed out that the average monthly increase in CPI over the past 3-6 months has been 0.3-0.4%, and in the next 6 months, the U.S. CPI year-on-year is expected to trend towards 4%. In the coming months, Trump must engage in "small-scale" actions on tariffs and immigration issues, rather than "big moves," to avoid triggering a second wave of inflation. This situation may help alleviate market concerns about the escalation of U.S. tariff policies.

Global Trade Landscape: A Delicate Balance of Interdependence

The fiscal situation of the U.S. government is also concerning. According to the latest data, the U.S. budget deficit has surged 25% in the past four months, reaching $840 billion, indicating that government spending is indeed accelerating. Hartnett's analysis indicates that although the Federal Reserve faces the challenge of intensified inflation, the asymmetry of its policies (with rate cuts occurring faster than rate hikes) and the lack of inflation credibility make adjustments to fiscal policy more complex.

As government budgets gradually expand, the market begins to worry about policies related to large-scale spending. Hartnett believes:

"Congress may adopt two reconciliation bills instead of one, which reduces the likelihood of significant cuts to defense spending."

Hartnett continues to be optimistic about the BIG investment strategy he previously proposed:

1. Bonds: He believes that 5% may be the "multi-year high point" for the yield on 30-year U.S. Treasury bonds. The likelihood of bond yields significantly dropping below 4% in the short term is low
2. International: Hartnett is optimistic about the international stock market in 2025, believing that it essentially bets on the recovery of the global manufacturing cycle. He pointed out that Chinese tech stocks such as Baidu, Alibaba, Tencent, and Xiaomi have risen 22% since January 20, far exceeding the US Mag7.
3. Gold: Gold prices continue to rise, reaching a historic high far above $2,900 on Friday