Market Analysis

Analysis generated 78 hours ago

Executive Summary

2/2/2026, 6:40:32 PM

Current market pricing overestimates inflation persistence at the 2.5% level, failing to account for the favorable base effect of Jan 2025 (0.5% MoM) being replaced by a lower current monthly estimate. Leading indicators like the Cleveland Fed Nowcast (2.36%) and falling rental vacancy rates suggest 2.3% or 2.4% are the most probable outcomes, creating significant mispricings in those buckets.

BUY 🡆 YES

Underpriced Mode at 2.4%

+52% EV

Conf: 85/100

Will annual inflation increase by 2.4% in January?

AI Prob

40.0%

Price (Then)

26.3¢

Price (Now)

26.3¢

Kelly Stake

4.5u

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A 0.4% MoM increase in January (consistent with seasonal repricing and higher energy costs) results in a 2.4% YoY figure. This is the statistical mode and median of most recent independent forecasts, yet the market discounts it in favor of the 2.5% bucket.

BUYING YES

BUY 🡆 YES

High Value Alpha at 2.3%

+86% EV

Conf: 80/100

Will annual inflation increase by 2.3% in January?

AI Prob

25.0%

Price (Then)

13.4¢

Price (Now)

13.4¢

Kelly Stake

3.5u

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The Cleveland Fed Nowcast projects 2.36% for the January annual figure. A 0.3% MoM headline increase (aligning with Dec's performance and cooling shelter costs) would resolve this market to 2.3%. The current 13% pricing is a major miscalculation of the base effect shift.

BUYING YES

BUY 🡆 NO

Fade Market Consensus at 2.5%

+17% EV

Conf: 88/100

Will annual inflation increase by 2.5% in January?

AI Prob

80.0%

Price (Then)

68.0¢

Price (Now)

68.0¢

Kelly Stake

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The market considers 2.5% the favorite (32% implied), but this would require a 0.5% MoM increase. Given six consecutive months of rent declines and a loosening labor market, such a high MoM print is unlikely even with the January seasonal reset.

BUYING NO

BUY 🡆 YES

Downside Tail Hedge at 2.2%

+203% EV

Conf: 65/100

Will annual inflation increase by 2.2% in January?

AI Prob

5.0%

Price (Then)

1.7¢

Price (Now)

1.7¢

Kelly Stake

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A 0.2% MoM print—common during periods of declining shelter costs—would trigger a 2.2% annual result. At current odds, this represents a highly convex hedge against a larger-than-expected cooling in the services sector.

BUYING YES

BUY 🡆 NO

Safe Yield on 2.6% Overestimate

+12% EV

Conf: 92/100

Will annual inflation increase by 2.6% in January?

AI Prob

95.0%

Price (Then)

84.5¢

Price (Now)

84.5¢

Kelly Stake

2.5u

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A 2.6% YoY figure would require a 0.6% MoM jump. While January can be volatile, current data on gasoline prices (falling from 10-week highs) and core components makes a 0.6% print highly improbable.

BUYING NO

BUY 🡆 NO

High Probability Fade of >=2.7%

+6% EV

Conf: 95/100

Will annual inflation increase by ≥2.7% in January?

AI Prob

98.0%

Price (Then)

92.6¢

Price (Now)

92.6¢

Kelly Stake

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This outcome requires zero disinflation from December levels. With the Jan 2025 0.5% high being removed from the rolling 12-month calculation, maintaining a 2.7% annual rate requires a massive 0.7% MoM print, which is unsupported by current nowcasting.

BUYING NO