We are flying in darkness,' with no govt economic data available: Economist Torsten Sløk

Inflation Concerns - Service sector inflation is showing signs of life, with prices paid by service sector companies for inputs increasing, suggesting upside risks to service sector inflation [1] - Services make up 60% of the CPI index, so a higher rise in service sector inflation suggests that overall inflation may be more sticky and elevated [1] - The consensus forecast expects inflation to be 3% for the next 12 months, while the Fed's target is 2%, indicating a potential upside risk to inflation if the economy doesn't slow down [2] - Goods inflation is moving higher partly because of tariffs, and service sector inflation is also showing upward pressure, leading to the conclusion that a pause in rate cuts may be warranted to assess alternative inflation indicators [2] - If inflation stays higher for longer, consumers will face higher prices, impacting real spending, especially for price-sensitive consumers [2] Economic Outlook - The absence of government data on non-farm payrolls and inflation makes it challenging for markets and the Fed to assess the true state of the economy [1] - Economists have been predicting slowdowns that haven't materialized, and the delayed negative effects of the trade war may not arrive, suggesting the economy may not slow down as expected [1] - Alternative data sources to watch in the absence of government data include Redbook same-store retail sales (weekly), OpenTable restaurant data (daily), and Star hotel data (weekly) [1] AI Impact - The AI story now makes up 35% of the S&P 500, with the 10 biggest stocks accounting for almost 40% of the overall S&P, indicating a high concentration [2] - Larger companies are beginning to report a slowdown in their adoption rate of AI, posing a risk to the economic outlook if the AI story starts to fade [3] - There is a very high concentration in the AI story that's driving the stock market forward, which is somewhat disconnected from what's going on in the economic outlook [5]