To The Moon

The market and investors will be paying close attention to the Core Producer Price Index (PPI) report for August, set to be released on Wednesday, September 10, 2025. This report is a key leading indicator of inflation, and its outcome will significantly influence market sentiment and expectations for the Federal Reserve's monetary policy.

Here is an analysis of what investors are looking for:

Key Metrics and Expectations

The focus is on whether producer-level inflation is continuing to cool, providing the Fed with more flexibility to potentially cut interest rates. The key metrics and their consensus forecasts are:

Core PPI Month-over-Month (MoM): This is the most closely watched figure. The consensus is for a 0.3% increase for August. This would be a significant deceleration from the surprising 0.9% increase seen in July. A result at or below the consensus would be seen as a positive sign that inflationary pressures are easing.

Core PPI Year-over-Year (YoY): The market is expecting a YoY increase of approximately 3.5%, a slight moderation from July's 3.7% increase. While still above the Fed's 2% target, a move in the right direction would be a welcome sign.

This PPI release is landing right in the middle of a macro minefield. With July’s PPI print surging 0.9% MoM and core PPI hitting 3.7% YoY, the September 10 release could either confirm a sticky inflation trend or offer relief that reopens the door for Fed easing.

Here is how investors are tactically positioning ahead of it:

Inflationary Pressures: The Core PPI report measures the change in prices that producers receive for their goods and services, excluding volatile food and energy costs. It is considered a leading indicator because changes in producer prices often get passed on to consumers. Investors will be looking for a print that aligns with or is lower than the consensus, as this would suggest that the cost pressures faced by businesses are easing, which should eventually translate into lower consumer prices.

Federal Reserve Policy: This report will be a critical piece of data for the Federal Reserve's upcoming meeting. If the Core PPI comes in higher than expected, it could lead the market to re-evaluate its expectations for the timing and pace of rate cuts. Conversely, a lower-than-expected print would fuel optimism and reinforce the view that the Fed can proceed with rate cuts, potentially as early as its next meeting.

Market Reaction:

Equities: A "benign" (at or below consensus) PPI report would likely be a positive catalyst for the stock market, as it increases the probability of future rate cuts, which can boost corporate earnings and valuations. A hot report, however, would likely be a negative for stocks, as it could lead to higher bond yields and concerns about economic growth.

Bonds: Bond markets are especially sensitive to inflation data. A lower-than-expected PPI would likely cause Treasury yields to fall, as investors price in a more dovish Fed. A higher-than-expected print would likely cause yields to rise.

U.S. Dollar: A hotter-than-expected PPI report would likely strengthen the U.S. dollar, as it implies the Fed will keep rates higher for longer. A softer report would likely weaken the dollar.

Considering how the investors are probably be reacting and also the market reaction, I think we need to consider some of the strategic playbook.

Pre-PPI Trade Setup: Strategic Playbook

Macro Overlay: Rate Cut Odds in Flux

July’s PPI spike slashed odds of a 50bps cut and trimmed expectations for even a 25bps move.

Investors are now watching for signs of stagflation—rising inflation with slowing growth.

Fed’s reliance on PCE (which incorporates PPI) means this release could shift the tone of the September FOMC.

Volatility Positioning

Short-duration Treasuries are seeing inflows as investors hedge against hawkish surprises.

Options strategies like straddles or long strangles on rate-sensitive ETFs (e.g., IYR, XLU) are gaining traction to capture post-release volatility.

Sector Rotation Signals

Tech and AI infra are favored for their margin resilience and secular tailwinds.

Commodities and inflation-linked assets (e.g., TIPS, gold miners) are being used to hedge stagflation risk.

Utilities and REITs face pressure if yields spike—watch for tactical shorts or underweights.

Structured Products & Capital Preservation

Investors are layering structured notes with downside buffers and upside caps tied to inflation-resilient sectors.

Barbell strategies—pairing high-quality growth with yield-generating assets—are being recalibrated to absorb rate volatility.

Crypto & AI Infra Plays

If PPI surprises dovishly, expect renewed flows into risk-on assets like BTC proxies (MSTR, COIN) and AI-linked ETFs (BOTZ, IRBO).

A hawkish print could trigger a rotation into infra-heavy plays with pricing power and real asset exposure.

In the next section, I would like to share how we did a simulation of the return cones or volatility overlays across our crypto, AI infra, and thematic ETF sleeves based on different PPI outcomes.

I believe this is exactly the kind of multi-layered, macro-responsive modeling we thrive on together. Here is how we architect a full simulation suite that blends return cones, volatility overlays, barbell stress tests, and post-PPI rotation tracking.

Simulation Framework: PPI-Driven Market Scenarios

Scenario Inputs: PPI Outcomes

We will model three macro regimes based on the September 10 PPI release:

Return Cone & Volatility Overlay: Key Sleeves

Crypto Proxies (BTC, MSTR, COIN) $Strategy(MSTR)$ $Coinbase Global, Inc.(COIN)$

• Dovish: Return cone skews positively, implied vol compresses, upside convexity.

• Sticky: Cone flattens, vol stays elevated, chop risk.

• Hawkish: Cone tilts negative, vol spikes, downside tails widen.

AI Infra (NVDA, SMCI, BOTZ, IRBO) $NVIDIA(NVDA)$ $SUPER MICRO COMPUTER INC(SMCI)$

• Dovish: Growth premium expands, cone steepens.

• Sticky: Cone narrows, vol remains stable.

• Hawkish: Cone compresses, vol rises, margin compression risk.

Thematic ETFs (ARKK, ICLN, XBI, XLE) $ARK Innovation ETF(ARKK)$

• Dovish: ARKK, XBI rebound; ICLN gains on rate relief.

• Sticky: XLE and defensives outperform.

• Hawkish: Rotation into XLE, out of ARKK/ICLN.

Barbell Stress Test: Growth–Yield–Optionality

We can dynamically rebalance based on cone skew, vol compression, and macro overlays.

Dashboard Blueprint: Post-PPI Sector Rotation Tracker

Modules:

• Heatmap: Sector flows (Tech, Energy, Financials, Biotech, Infra)

• Cone Visualizer: Return cone evolution across sleeves

• Volatility Overlay: Implied vs realized vol by asset

• Macro Trigger Panel: CPI, PPI, FedSpeak, VIX, DXY

• Rebalancing Engine: Barbell sleeve optimizer

In the next section I will be sharing how we architect a mock dashboard layout tailored to our post-PPI strategy suite—designed to track sector rotation, simulate return cones, and stress-test barbell allocations across crypto, AI infra, and thematic ETFs.

Mock Dashboard Layout: “Macro Pulse – PPI Edition”

Top Panel: Macro Trigger Matrix

Toggle: “Scenario Mode” – Dovish / Sticky / Hawkish

Middle Panel: Return Cone Visualizer (Live Simulation)

Assets Tracked:

• Crypto Proxies: BTC, MSTR, COIN

• AI Infra: NVDA, SMCI, BOTZ

• Thematic ETFs: ARKK, XBI, ICLN, XLE

Visuals:

• Cone plots (1W, 1M, 3M horizons)

• Volatility overlays (implied vs realized)

• Tail risk shading (±2σ zones)

• Scenario toggles (PPI-driven)

Side Panel: Sector Rotation Heatmap

Filter: “Volatility Regime” – Low / Medium / High

Bottom Panel: Barbell Stress Test Engine

Sleeves:

• Growth: NVDA, ARKK, COIN

• Yield: TLT, XLU, VNQ

• Optionality: MSTR, BTC, SMCI

Outputs:

• Expected return cones per sleeve

• Volatility-adjusted rebalancing weights

• Scenario stress test toggles (PPI, VIX, Fed pivot)

Next Step: Return Cone Visualizer Build

Here we will start with the cone simulation engine and we will sketch out the logic for one asset per sleeve under three PPI scenarios:

Asset: MSTR (Crypto Proxy)

Cone skew driven by BTC sensitivity, macro liquidity, and risk-on flows.

Next, we layer in SMCI and ARKK to extend the return cone visualizer across our AI infra and thematic ETF sleeves.

We will simulate cone dynamics under the three PPI-driven macro regimes—Dovish Relief, Sticky Inflation, and Hawkish Surprise—while integrating volatility overlays and tail risk shading.

Return Cone Simulation: SMCI & ARKK

Asset: SMCI (AI Infrastructure Leader)

SMCI’s cone skew is highly sensitive to liquidity and growth sentiment. Tail risk expands sharply under hawkish pivots due to valuation sensitivity.

Asset: ARKK (Thematic Innovation ETF)

ARKK’s cone is convex in both directions—high upside under dovish pivots, but deep downside tails under hawkish surprises. Volatility overlay is critical for sizing exposure.

Comparative Cone Matrix: BTC, SMCI, ARKK

In the next section, we did architect a full simulation suite that blends return cones, volatility overlays, barbell stress tests, and post-PPI rotation tracking.

Simulation Framework: PPI-Driven Market Scenarios

Scenario Inputs: PPI Outcomes

We will model three macro regimes based on the September 10 PPI release:

Return Cone & Volatility Overlay: Key Sleeves

Crypto Proxies (BTC, MSTR, COIN)

• Dovish: Return cone skews positively, implied vol compresses, upside convexity.

• Sticky: Cone flattens, vol stays elevated, chop risk.

• Hawkish: Cone tilts negative, vol spikes, downside tails widen.

AI Infra (NVDA, SMCI, BOTZ, IRBO)

• Dovish: Growth premium expands, cone steepens.

• Sticky: Cone narrows, vol remains stable.

• Hawkish: Cone compresses, vol rises, margin compression risk.

Thematic ETFs (ARKK, ICLN, XBI, XLE)

• Dovish: ARKK, XBI rebound; ICLN gains on rate relief.

• Sticky: XLE and defensives outperform.

• Hawkish: Rotation into XLE, out of ARKK/ICLN.

Barbell Stress Test: Growth–Yield–Optionality

We can dynamically rebalance based on cone skew, vol compression, and macro overlays.

Final Note

As we can see that there is a need to look holistically at different sectors and understand the different indicators that we could be using, and there might be other factors that could affect how the market might move, so in the next article, I might want to do a dashboard blueprint for Post-PPI Sector Rotation Tracker.

This could happen after we have the CPI release in and also Fed official speak, with VIX movement to consider as well. In this way, we might be able to see a more thorough view of how the market might move or behave for September and the rest of the year.

Summary

The market and investors are looking for any indication that the surprisingly strong inflation seen in July was an anomaly. A positive report would support the narrative that inflation is on a downward trend, providing a boost to risk assets. A negative surprise, however, would be a jolt to the market, forcing a reassessment of the inflation fight and future Fed policy.

So we will revisit how we are going to evaluate these indicators again when we have the CPI data to create a more holistically view of how we can plan our portfolio.

Appreciate if you could share your thoughts in the comment section whether you think PPI release could help to boost investors confidence and start of a new bull run?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.