Markets cheered April’s CPI report. Headline inflation dropped to 2.3% — the slowest pace in over three years. Core inflation softened. Egg prices fell 12%. Twitter lit up. CNBC called it “a relief.”
But here’s the problem: none of this tells you what to buy.
While everyone was staring at shelter inflation and frozen bakery products, Apple added $140 billion in market cap and Nvidia ripped higher — again. All because Wall Street thinks the Fed now has room to cut.
The logic goes like this:
Lower inflation → More room for rate cuts → Higher valuations → Stocks go up.
But that’s not how markets actually work. And it’s certainly not how stock selection works.
CPI is Lagging, Earnings Are Leading
CPI is a noisy, backward-looking metric. It tells you what was — not what’s coming. Shelter costs are still overstated. Tariff impacts haven’t fully hit. And “core” inflation keeps getting whipsawed by volatile subcomponents like used cars or furniture.
Meanwhile, company earnings — especially in mega-cap tech — are telling a different story.
Some names (like Microsoft and Google) are executing with ruthless efficiency and expanding margins in AI. Others are showing signs of cost fatigue, inventory build-up, or falling net income — despite revenue growth.
This is where real investing happens.
What the Rally Misses
Let’s be clear: the rally since the CPI print is mechanical. Its passive flows built on hopes that rate cuts will be easier for Powell now that tariffs are less of a threat.
But if you zoom in, you’ll see something very telling:
Small caps? Flat.
Banks? Underperforming.
Oil and industrials? Weak.
This isn’t a risk-on market. It’s a rotation into safety disguised as celebration.
And that brings us to the real issue: the fundamentals of the companies you’re buying.
Follow the Earnings, Not the Egg Prices
The U.S. Bureau of Labour Statistics might be excited about a 12.7% drop in egg prices. But unless you’re long Cal-Maine Foods, it doesn’t matter.
What does matter?
How much Nvidia’s data center revenue is growing relative to capex acceleration
Whether Apple’s services margins can offset slowing iPhone sales
If Meta’s Reality Labs losses are finally stabilizing
And how Amazon’s retail operating income is trending vs. AWS
This is where real edges are found.
The Takeaway for Investors
Inflation headlines may dominate the news cycle, but they don’t tell you where to put capital. Earnings do.
And in a market this top-heavy — where five stocks drive over 60% of the S&P 500’s year-to-date return — precision matters more than ever.
At NorthTech Capital, we don’t chase narratives.
We dissect the data that moves actual valuations, then position ahead of the crowd.
Stay sharp,
David Thomas
Founder, North Tech Capital
“The Smarter Way to Invest in Mega-Cap Tech”