💸 Inflation Inflection 2.0 - With Easing Inflation, Will The Fed Pivot?
Investors and economists have breathed a sigh of relief as new inflation data suggest that price pressures are easing. While the prices of everyday goods are still significantly higher than a year ago, some of the underlying trends are beginning to reverse. This is largely in line with our Inflation Inflection note earlier this year that inflation would likely start to ease come the summer months.
Stocks have rallied as markets price in hopes the Fed will pivot soon. The S&P 500 and the Nasdaq have now gained 16.7% and 22.6%, respectively, since the middle of June when oil prices peaked and the Fed began accelerating its rate hikes to fight inflation. But we’re not chasing the rally. Why? We view market expectations for a dovish pivot as premature and that a pivot will come later as the Fed is now responding to pressure to tame inflation.
We discuss in this episode of The Wealth Effect Podcast:
📉 Inflation Measures
🌽 Food Cost Drivers
🌡️ Consumer Sentiment & Inflation Expectations
Matt Faubion, CFP®
Founder - Wealth Manager
Show notes and charts:
Inflation is beginning to ease
Food prices are driven largely by labor costs
Consumer sentiment is slowly improving as expected inflation declines
The bottom line: There are positive signs that inflation could be easing, and markets have recovered significantly in just a short period as energy prices and other pressures have declined. However, much work remains on the inflation front, and the current chatter over an imminent Fed Pivot will likely prove transitory.
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