Talk about instant impact!

Don’t look now, but two big milestones were hit this week on prices signaling lower inflation is just around the corner. First, the 5-year break-even rate on inflation just fell to 2.2%, which is lower than before the Iran conflict began when gas prices were well below $3 a gallon.

Second, the price of gold, which soared to above $5,300 an ounce in February, fell below $4,000 this week.

We think these are undeniable indicators investors got the message last week that the new sheriff in town – Fed Chair Kevin Warsh – is fully committed to his promise of “price stability.” He is already driving down inflationary expectations, which lowers the cost of capital.  It also means that worries this week of three interest rate increases at the Fed by the end of the year are laughably wrong.