What Goes Up
Good morning 🌅, and welcome to this week's edition of Kalshi Kit. Last week ended with the release of a surprisingly hot jobs report, which will be followed by a highly anticipated inflation report this Wednesday.
Last week's job report showed the U.S. added over 528,000 jobs in July, more than double what the estimates had projected. The report has raised major questions over what the Fed should do going forward.
July inflation data is slated to be released tomorrow morning. This will provide investors with key insight into whether record-high price pressures have begun to cool off.
The Senate passed the Inflation Reduction Act (IRA) yesterday, providing major changes to policy regarding healthcare, taxes, and renewable energy.
Let's see how the Kalshi markets are responding to these recent developments:
Market Watch 👀
July Inflation Data 📈
>0.2% Yes: 59¢ No: 41¢
Kalshi markets are predicting a 59% chance that inflation rose by 0.2% or more in July and a 41% chance that it rose by less than 0.2%.
Despite gas prices having fallen almost a dollar from their peak in June, restricted output from OPEC is projected to keep gas prices and inflation high. Housing prices, which make up 40% of core CPI, have also continued to tick up. The average price of single-family home hit an all-time high in June.
A recent survey from the New York Federal Reserve showed that U.S. inflation expectations have dropped sharply across all time horizons. The expected rate of inflation for the coming year fell from 6.8% to 6.2% in July.
Fed Interest Rates 🏦
>3.00%? Yes: 66¢ No: 34¢
Kalshi members are predicting a 66% chance that the Federal Reserve will hike interest rates by 75 bps or more in September. On the other hand, members are predicting a 34% chance that the hike will be less than 75 bps.
San Francisco Fed President Mary Daly stated in a recent speech that the Fed is "far from done" with regards to taming inflation. Daly also iterated that a 50 bps rate hike for September is not set in stone, leaving the use of larger rate hikes on the table in the aftermath of July's hot jobs report.
Recent data by the New York Federal Reserve shows that consumer expectations regarding food and gas prices have dropped sharply compared to the month of June. This signals that inflation could cool in the months to come, paving the path for more dovish activity by the Fed going forward.
>3.25%? Yes: 6¢ No: 94¢
Kalshi members are predicting a 6% chance that the Federal Reserve will hike interest rates by 100 basis points or more in its September meeting. On the flip side, Kalshi members are predicting a 94% chance that the rate hike will be less than 100 basis points.
Michelle Bowman, who serves on the board of governors for the Federal Reserve, stated in a recent interview that "similarly sized increases (in interest rates) should be on the table until we see inflation declining in a consistent, meaningful, and lasting way." Bowman also suggested that "ongoing increases" in the size of these hikes could be appropriate.
Consumer expectations for inflation have fallen significantly, according to a recent survey by the New York Federal Reserve. The three and five year expected inflation rate has dropped by around half a percent, potentially paving the way for less aggressive policy by the Fed.
Hedge Against a Hurricane ⛈️
This year's hurricane season, which usually kicks off just before August, has been off to a slow start. To date, only three tropical storms have been named by the National Oceanic and Atmospheric Administration.
However, there are signs of hurricane activity picking up. Starting last week, the National Hurricane Center began actively monitoring a tropical wave off the coast of Africa, which has the possibility of turning into a tropical depression in the coming days.
In a recent statement, the National Oceanic and Atmospheric Administration stated that they expect this year to be above average for hurricane activity and cautioned vulnerable communities from taking a relaxed stance in the face of the slow start.
The agency asserted that "while the tropics have been relatively quiet over the last month, remember that it only takes one landfall storm to devastate a community." Referencing 2021, the agency iterated that after a quiet start to the season in late July an average of 2.3 storms formed a week between the months of August and September.
With Kalshi's new hurricane contracts, members can financially shield themselves from the risks of the upcoming hurricane season.
Kalshi's hurricane markets enable members to trade directly on whether a hurricane will hit the coast of Miami, New Orleans, New Jersey, or New York City this year. This will provide members the ability to hedge themselves against any damages to their home or business in the event of severe weather.
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