Looking at the weighted components of US CPI is revealing, to say the least (see chart below).
Housing (includes fuel, electricity, etc) accounts for a massive 42% of all consumer spending; food and transport is another 33%. Therefore, a huge 75% of all spending goes to cover the absolute necessities of shelter, food and transport. And it’s exactly those sectors that are impacted the most by price spikes in energy, food and basic materials.
Since incomes are not rising rapidly, spending on all other, more discretionary, items is going to get curtailed to a very great extent. We are already seeing hints of this: Netflix is losing subscribers and Amazon sales are softening.
Ergo: Recession watch is ON and risk appetite is OFF.