U.S. is going to see a reacceleration of inflation, says KKM's Jeff Kilburg

So let’s talk about it more. With us tonight is KKM Financial Founder and CEO, Jeff Kilberg, also a CNBC contributor and Piper Sandler Chief Market Technician, Craig Johnson. He’ll look at the market aspect of this as well. Guys, welcome back Jeff. You were there the night we got the I betcha, I betcha we got you know, rates have kind, I betcha they’ve gone up since then doesn’t mean they will continue. What though are you expecting from tomorrow CPI, because I just showed all those and you’re a former commodity current commodity guy. I just showed all those prices that are re accelerating. I think we get a higher than expected number, Sally. And to your point, I wasn’t a mathematician at University of Notre Dame, but we are seeing an acceleration. In February, the CPI was 3.2. Tomorrow the expectations are 3.4. So that is not an outlier, it’s just acceleration of core inflation. So we’re going to have to see once they strip out food and energy. But to your point, I think it’s an outlandish statement. Back in January, if you would have said we’re going to see rate hikes this year. Every one was expecting six rate cuts, maybe three. Now we’re down to two, maybe one. So that question that you proposed earlier is going to be contingent upon that CPI number tomorrow. But I actually think we’re going to see an acceleration because if you remember back in November, Sally, the stock market was 25% lower. Now we have $10 trillion more of valuation to play with more CapEx. Consumers are feeling stronger. So there’s a little bit of a variable here. So I think we’re actually going to see a surprise uptick in inflation. You know listen Craig, you’ve been more right than you’ve been wrong, but all of Wall Street, there is not one woman or man out there that is right 100% of the time. And strategists, they make their expectations about rates and where they might go. They are allowed to change them and they have been changing them. Let’s take a look at this right. We are seeing the expectation to Jeff’s point, we were kind of in that mostly the average guess was three rate cuts. Now we continue to reduce the expectations for that. Where do you see inflation and interest rates going over the next 6 to 12 months? Well, slowly as you know, I’m a pictures kind of guy. I’d like to look at a lot of the charts and I think the charts tell us a lot about what’s happening with inflation right now and also sort of what the expectations are from the bond market. If you just take a look at 10 year bond yields at this point in time, they’re starting to trend higher and they have been making a very simple series of higher highs and higher lows. I think this is going to be a very fascinating interest CPI print tomorrow because if we start seeing 10 year bond yields working their way up toward 4 1/2, I don’t think equity markets are going to be real happy. And I think if you start to see even a push closer to that 5%, which is again it’s not my forecast, but if these CPI numbers are hotter than expected, then 10 year bond yields going to respond. And at that point in time, equity markets are going to come in and they’re going to pull back And I think you’re going to see fewer rate cuts coming into play. Right now is selling, it’s about 2 1/2 rate cuts is what’s priced in. And again that’s still maybe too high 2 1/2 and and to Jeff’s point and Jeff responded yourself I guess, which is if it if you’re right, it comes in hotter, we could see that 2 1/2 and I know there’s no such thing as 1/2, but you get the point. It’s sort of all the estimates that are aggregated up go to two or 1 1/2. And do you agree that the market won’t like that or has the market already expected that and that’s why rates have gone up and NVIDIA has fallen? I don’t think the market has expected nor priced that in. But Craig brings up a great point and I always look to the bond market for leadership and Craig talked about the 10 year going up to 4 1/2 percent or 5% being problematic. I think the problem is already here at 4.36 in the 10 year note with the 10 year note with expectations. It was supposed to be down at 3 1/2% by now in Q2 of 2024. And here we are, I think there’s a lag effect, there’s a disconnect. We had Uber sensitivity to the bond market, equity markets. I’m talking about the way equity is related and correlate to the bond market. But now with the 10 year note elevated, we haven’t seen stock slow down. So I think there is a opportunity of the S&P 500 to pull back. To Craig’s point, I see 4950 on the chart. I’m not going to step on any charts. That’s Craig’s world. At the end of the day, it seems a little overvalued up here. Selling maybe CPI is that catalyst to get things repriced, which would be healthy for all market participants. Let’s end it, Craig, on an optimistic note, all right, but we had an eclipse yesterday. Everybody’s happy. It’s Tuesday, the worst day of the week. What if we get a cooler then expected CPI number, do we then go back to that three, maybe four rate cut story is does tomorrow matter that much? Oh, I absolutely think tomorrow matters that much. And I think if you get a cooler than expected sort of core number out there. But again everybody’s eating and everybody is certainly driving and these things matter. But if the number’s cooler than expected, yeah, the market’s going to certainly going to lift and those rate cut expectations certainly could come back up. But don’t forget about the CRB index, Brian, and you’ve got a big breakout happening there. And that’s a lot of energy, That’s a lot of food, that’s a lot of copper. All these things are breaking out. And again, all these pictures suggest to me putting it all together not to be doom and gloom, that inflation is probably going to be hotter than people expect. And Joe Biden will certainly lose his bet.