US stocks and gold wobbled on hotter-than-expected inflation and bargain hunting in AI stocks
Overall underlying core inflation (CPI+PCE) was above 3.0% and may scale to 3.50% by Q1CY27.
The Fed may hike only 0.25% rather than 0.50% as another insurance hike and wait for Trump’s actual policy post Jan '27 (under the lame-duck presidency).
Trump is a known source of supply chain disruption—be it a trade war or an Iran war—and if Trump does not correct himself, he may cause synchronized global stagflation or even an all-out recession.
On November 10, apart from Trump & Co’s ongoing ‘Reality Shows’ (insane idiotic circus) over midterm washout, the focus of the market was also on U.S. inflation data for October. The US CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, such as food, transportation, and shelter. Core CPI excludes the volatile food and energy categories to provide a clearer view of underlying inflation trends.
For October '26, BLS already announced in advance that it will not be able to officially publish/calculate any Y/Y CPI data, as the comparable index levels survey (collection of price data/samples) was not done in the prior year (Oct '25) due to BLS closure amid a government shutdown (another example of Trump-related political & policy paralysis). But we have estimated the core & total CPI index for Oct '25 by assuming a sequential average R/R of 0.2-0.3% and calculated the Y/Y core & total CPI.
Accordingly, on November 10, the BLS data (NSA) showed the annual (y/y) US core CPI inflation rose to around 2.6% in October, against 2.6% sequentially and 3.0% yearly.
The 3MRA core CPI rate was around +2.5% in Oct '26 against 2.8% (y/y). The 2025 average was 2.9% vs. 2.6% in 2026 (YTM). In Dec '19 (pre-COVID), the US core CPI was 2.3% against core PCE 1.5%; average core inflation (CPI+PCE) was around 1.9%, just below the Fed’s 2.0% target. Now, in Oct '26, US core PCE inflation may come around +3.1%, and in that scenario, average core inflation would be around +2.9%, still +100 bps higher than the +1.9% Fed target (pre-COVID levels).
On Nov 10, the BLS data (SA) also shows the sequential (m/m) US core CPI rose +0.3% in Oct '26 from +0.3% in the preceding month and is hotter than the market expectations of 0.2%. The October sequential core CPI was boosted by transportation, shelter, medical care, and goods & services. Overall, the average sequential (m/m) core CPI indicates an annual rate of around +2.7% (as per SA data), almost equivalent to +2.8% as per NSA data. As per the current trend, the sequential core PCE may come around +0.4% in Oct '26.
In Oct '26, the BLS data shows the US super core CPI inflation (w/o food, fuel/energy, shelter/housing, used cars & trucks) was around 2.4% in Oct '26 from 2.3% in the prior month, compared to 1.7% in pre-COVID (Dec '19) times. The US Trimmed Mean CPI (Cleveland Fed) was around 2.8% in Oct '26 against 2.7% the prior month and pre-COVID levels of 2.3%.
In Oct '26, the US CPI increased by 3.7% against 3.7% in the prior month, 3.0% in the prior year, and above the market expectations of 3.6%. As per the current trend, the US total PCE for Oct '26 may also come around +3.7%.
Overall, the underlying average CPI was around +3.7% in Oct '26 against +2.6% in 2025.
In Oct '26, energy inflation and food inflation were hovering around 22% & 2.5% against pre-COVID levels of 3.4% and 1.8% (2019).
In Oct '26, the sequential (m/m) US CPI was +0.4% against +0.6% in the prior month and above market expectations of +0.3%. The sequential total CPI was boosted by shelter, food & daily groceries (FMCG), recreation, medical care, and motor vehicle insurance costs, while dragged down by energy, used cars, and communication products & services.
Overall, the underlying average sequential CPI rate indicates yearly inflation at around +3.8% in Oct '26 against +2.6% in 2025.
US services and shelter inflation was around 3.5% in Oct '26, compared with 2.8% and 3.2% in Dec '19 (pre-COVID).
As per the current trend, every 5% of monthly volatility in oil may result in 100 bps volatility in monthly US energy inflation, 50 bps in total CPI inflation (m/m), and core CPI by around 30 bps (m/m) on average.
Conclusions
Overall, the present levels of higher inflation in the US are clearly a byproduct of higher oil & energy costs—it's transitory in nature unless Trump makes it permanent with his bellicose policies. On the other side of the dual mandate, the US labor market/employment situation is stable due to the contraction of the labor force but not solid due to some structural and cyclical issues. Also, Trump’s chaotic policies, from the trade & tariff war to the Iran war and hawkish immigration policies, are significantly contributing to inflation. The focus of the market is now on the Iran war/peace and the SOH/oil & inflation trajectory.
Overall, at a glance, under Trump’s unpredictable policies, the US economy may now be facing a stagflation-like scenario:
Higher cost of living/inflation (adverse effects of tariffs, supply chain disruptions after trade & Iran war, and higher cost of energy/fertilizers/commodities)
Lower number of employed persons and a smaller labor force (both supply and demand issues/a slowdown in fresh job creation due to Trump’s uncertain policies and increasing reliance on AI/automation)
Lower economic growth (2.1% in CY25 vs. 2.8% in CY24); ~2.2% expected in CY26.
Thus, the Fed now has to act in a balancing way to bring down core inflation (PCE+CPI average ~3.5%) by around 150 bps to meet its inflation target. And at the same time, it has to ensure the headline unemployment rate stays below the 4.5% red line and further bring it down to around 3.8% pre-COVID average levels (maximum inclusive employment) from the present average of 4.3%. In brief, the Fed needs to bring down US core inflation by around 150 bps and the unemployment rate by 50 bps for its dual mandate of maximum employment and stable prices.
In theory, the Fed has to hike rates with QT (tighter monetary policy) to curtail the additional demand side of the economy so that it can match the currently constrained supply capacity and bring down prices/inflation. On the other side, the Fed has to also cut rates with QE (looser monetary policy) to stimulate the vicious cycle of higher demand/consumption, private CAPEX, and employment. JOLTS job data is showing subdued new job creation irrespective of labor force dynamics.
Thus, overall, the Fed has to ensure a neutral monetary policy—neither tight nor loose—to ensure a balancing act to bring down inflation without causing a sharp decline in employment. To ensure a soft landing, the Fed may continue to keep the real interest rate around +1.0% above average (12M/6M/3M) core inflation (CPI+PCE). At present, at a 4.00% Fed REPO rate and +3.5% average core inflation (CPI+PCE), the US core real interest rate is around 1.5% and is in the Fed’s neutral range—should neither stimulate nor drag the demand side of the economy. As a central bank, the Fed can only affect (control/manage) the demand side of the economy, not the supply side, which is the prerogative of the fiscal authority (government), not the monetary authority (Fed).
Therefore, the Fed should be on hold in December '26 after hiking 0.25% in September to wait for Trump’s actual action/policy, especially on Iran & the trade war. But even after becoming a Lame-Duck president, Trump may not relent on his Iran war fun, and he may escalate his ‘Iran war excursion’ during the transition period (November till late December) as revenge for losing the midterm miserably.
Officially, as a central bank, the Fed may be bound to hike rates in an effort to suppress demand, while the supply capacity of the economy is constrained, so that both match each other and bring down prices/inflation (whatever may be the underlying causes of lower/disrupted supply). But a central bank can always be in wait & watch mode if it feels that the underlying causes are cyclical/transitory rather than structural/permanent.
The whole world may have a sigh of relief if Trump and his Republican Party suffered a miserable loss in the Nov '26 midterm election. No country, even mighty China, is opposing Trump’s expansionist/war mongering stance, including the Iran war, publicly & vehemently. China may have business interests, as at the end of the day, the US is China’s biggest exporter client (single country) and also vice versa. And China is not ready to engage in an all-out war with the US, resulting in a doomsday 3rd and last world war (WW-III).
Thus, both China and the US are engaged in a behind-the-scenes proxy/cold war with each other, although they are dependent on each other for growth, development, and prosperity. Both the US and China are no longer seeking complete decoupling from each other but simple derisking in strategic sectors. The US is now also publicly acknowledging China as the closest 2nd superpower in terms of economy, technology, and military.
Traditionally, Trump is always a consistent source of supply chain disruption—be it the China trade war (1st term) or the global trade war, Iran war, and immigrant war (2nd term). Thus, under Trump, the Fed is inclined to hike rates, and too high rates for too long will inevitably invite a synchronized global recession down the line (2027-30). But Trump may also ensure a UKR war ceasefire and even an Iran deal by Dec '26.
Bottom line:
The US average core inflation (CPI+PCE) may hover around 3.00-3.50% by Dec '26-Mar '27, depending on Trump’s Iran war, trade war, and also AI trajectory (AI also boosted US core PCE inflation due to huge demand for AI-related infra & computer/chips), but an AI market crash may also slow down the inflationary impact. Thus, considering all the pros & cons, the Fed may hike only +0.25% on December 10, 2026, rather than 0.50% (as warned by Fed’s Governor Waller). As insurance, the Fed may hike +0.25% in December against average core inflation of 3.00-3.50%, keeping the real rate of interest around a 1.00-1.50% restrictive range and waiting for January—Trump's actual policy/action under the DEM-controlled Congress (as lame-duck president).
Technical outlook: SPX-500 and Gold
Looking ahead, whatever may be the narrative, technically SPX-500 (CMP: 7600) now has to sustain above 7675 for a further rally to 7725/7775/7800/7850 and 7875/7900/7950/8000 in the coming days; otherwise sustaining below 7655/7640, it may fall to 7600/7550/7500/7450 and 7400/7325*-7300/7150 in the coming days.
Technically, Gold (CMP: 4000) now has to sustain over 3985 for any recovery to 4075/4100-4150/4200 and 4275/4300-4350/4500 and 4550/4600-4650/4675 in the coming days; otherwise sustaining below 3975, Gold may further fall to 3940/3900-3875/3740 in the coming days.
