Inflation: CPI has taken on a 'Super Bowl-level importance,' strategist says

Baird Managing Director and Market Strategist Michael Antonelli joins Yahoo Finance Live to discuss whether inflation has peaked, bearish sentiment in the markets, and portfolio positioning.

Video Transcript

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BRAD SMITH: Welcome back to "Yahoo Finance Live," everyone. Despite the latest jobs reports exceeding estimates, recession concerns, they continue to swarm as Americans await a new inflation print this week for the month of July. Now what could this all mean for the markets? For more on this, we've got Michael Antonelli, Baird managing director and market strategist. Thanks so much for joining us this morning. Michael, in your bullish case, you believe inflation has peaked. Where has that started to show up to the extent that you've been tracking it thus far?

MICHAEL ANTONELLI: Hey, good morning, team. Great to see everybody on this fine Monday. If you look at some of the things that have come down noticeably, one of them would be commodity prices. I think that's what most people would point to in terms of inflation potentially peaking. Oil prices can't hold a bid, really. You've seen it in the softs. You've seen it in some of the-- you know, some of the other commodities. So you've already seen those come down.

Home prices have definitely started to ease. I mean, they may not be outright falling, but shelter and home prices, the pace of gains has certainly slowed down. And then auto prices. You start to see auto prices start to sort of stabilize a little bit in some of those used car indices. So CPI, obviously, has taken out a Super Bowl level of importance this week. I mean, you're going to have to be-- you know, you're going to be talking about that nonstop on Wednesday.

But you have started to see some of the inputs come down. And I think-- look at ISM prices paid. That suffered a huge drop. That also could point towards inflation potentially peaking here.

JULIE HYMAN: Well, I'm feeling pretty good listening to you, Mike, citing all of this stuff. So how do you position then going into this print, if it is a Super Bowl print?

MICHAEL ANTONELLI: It's a great question. Positioning is everything, as you know. You know, talking about economic data, talking about inflation, talking about all those kind of things is, like-- you know, talking about sports at a bar. It's like talking about the best football player, talking about who the best team is. Kind of a sports argument. Positioning is really all that matters. In fact, you should always be asking people, how are you positioned? I mean, that's really what I want to know because that's how you're actually engaging in the market.

Everybody's offsides. Can you guys point to anybody out there that's, like, banging the table being bullish? I mean, maybe Tom Lee. But that's, you know-- that's definitely his deal. You know, everybody's offsides. You've even seen S&P future open interest reports show hedges kind of go up. Russell 2,000, same thing.

So if position is really bearish, nobody's out there banging the table, and you get a soft print-- and believe me, the bulls need a soft print-- you could continue this rally a little bit higher.

BRIAN SOZZI: Yeah, Mike, I think Tom's looking for S&P 7,000 at some point. But, look, you know, who is bullish increasingly on the Yahoo Finance platform? We're seeing investors showing more interest in Microsoft and Apple than perhaps had been the case in prior months. Is it time for investors just to look beyond all the noise with the Federal Reserve and start to focus on high-quality stocks like that?

MICHAEL ANTONELLI: I actually looked before we just popped on here. I looked at where Apple was. Down 8% year-to-date. I mean, would you believe that given what we saw at the start of the year? You know, the fourth worst start to the year. Apple's down 8%. Microsoft, I think, was down about 17%.

I do like to remind people, especially on platforms like these or when I'm engaged with our clients, that, you know, buying good companies and holding them through very difficult periods is kind of, you know, the key to kind of growing wealth and reaching your goals. But, yeah, you definitely want to be looking at what out there has gotten kind of thrown out of the bathwater. Are there companies out there that just sort of got caught up in this whirlwind, whose earnings expectations aren't that bad?

You guys mentioned Nvidia. Clearly, it's still struggling. Maybe it's a good time to build a gaming rig. Clearly, still struggling. But there are companies like Apple executing on their business plans really well. And remember-- remember, the reason why these companies are so good is because they have suites of people every day trying to solve problems. And that doesn't change when inflation is high, when inflation is low, when Ukraine invades Russia, any of that-- Russia invades Ukraine. Any of that. So it's-- these people are trying to solve problems at all moments. And that's what makes them so great.

BRAD SMITH: And so for what we've seen in a lot of the earnings reports, companies either pulling or kind of suppressing some of the expectations for the future as well. Have we hit kind of the bottom of that period? Have we seen the last of that? Or do you expect more of that kind of going into future earnings periods as well, at least this year?

MICHAEL ANTONELLI: Yeah, this is what's really important. I looked at it this morning again right before I came on. If you were to go out to Q1 of 2023, all right? So that's three more quarters. There are no expectations for negative growth right now.

They are expecting the growth rate of earnings to slow in the S&P 500, but there are no expectations for it to sink, for it to actually go negative. There are companies pulling guidance. Obviously, it's a difficult time. And let me remind everybody that's watching this that the reason why it's a difficult time is because we just came out of a worldwide crisis. Like, we do tend to forget that.

There's a reason why the macro environment is so weird. But companies right now out to Q1 of 2023, in aggregate, were not expected earnings to fall. That's really important. That's really, really important. Earnings continue to grow is the bull case. Everyone offsides is the bull case. There is a bear case, but, right now, earnings are still growing even at a slower rate.

BRIAN SOZZI: Michael Antonelli coming out on fire for us to kick off this trading week. Baird managing director and market strategist, always good to see you. I'll talk to you on Twitter.

MICHAEL ANTONELLI: See you.