Volatility, confusion and Chaos. Is inflation being mispriced on China deflation blips? With inflation gauges showing up as volatile, energy and Wheat/food prices are all heading back up again. Inflation and stagflation maybe becoming entrenched.

The market is showing up signs of volatility, confusion and chaos.  As prices, if you look at commodities, are trying to price in either deflation (recession) or stagflation (a slow down plus rising prices), with indicators showing up as a mixture of both.  The main reason is China's COVID-19 lockdowns that of course, like most nations, poorly handle a snap back to hyper consumption when the all clear is called, further putting strain on supply chains i,e food.  I would argue that the recession that seem to be appearing via food/oil was lead by China's slowdown, but it was just a blip.  

Chart 1, sums up the stagflation argument, if one was actually needed.  The vertical bar chart is the commodity index futures now green and bid, with over lays starting with, Blue line: Lean hog 'futures' prices: @$112 highest since April 2022, Yellow line:  West Texas Intermediate (WTI) @$106 on its way to reclaim May's 2022 breakout prices of $108, which in turn has dragged the overall crude price out of its bear market.  Holding above the Putin "put" at $100.   The pale green line are Wheat futures @$891'4, rebounding sharply from July 2022 lows @$804'4 per contract, higher price moves as we move towards the colder months and Russia's blockade remains, via the Black Sea (Ukrainian wheat).   

Finally the chart below is the 10- yr Break even inflation rate, which had fallen very close to Jan 2022 lows @2.23% when the oil price was $83 pb, it has now risen (July 2022) to 2.37%.  Which could be a miscalculation on expectations that deflation was rearing its head.   This is of course is not occurring sans the Copper price, which is very much showing the globally construction is slowing down, while costs are moving upward.