The US equity market is up nearly +20% since early November 2023 so a pullback after three very strong months is completely natural. The cause for today’s price action is an above-average CPI inflation reading but a deeper dive into the underlying data is warranted.
Headlines can be misleading. Core CPI excluding shelter costs has averaged +2% for six months now – right in line with the Fed’s 2% inflation target. That’s the chart below and that chart doesn’t look like run-away inflation to me. Food costs also getting a lot of attention in this morning’s data but it’s food prices out-of-home, not the food prices consumed at home (yep, they get that granular). The bigger picture is that inflation peaked in mid-2022 and has come down a lot since. If the Fed wants a reason NOT to cut in March, they just got it – the headline here gives them cover to wait til May 2024 for cut #1. But we are a very, very, very long way from where we were in mid-2022 with regards to inflation and it being out of control.
2024 is about Fed cuts, earnings growth, and the forgotten 490 stocks in the SP500 not named Meta or Google or Amazon or Nvidia or the like.
Source: EISI as of February 13, 2024
Richard Barrett
Chief Investment Officer
CW Advisors LLC (“CWA”) is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). Registration does not imply a certain level of skill or training. For additional information, please visit our website at cwadvisorsgroup.com or visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov by searching with CWA’s CRD #310873.
This note is provided for informational purposes only. CWA believes this information to be accurate and reliable but does not warrant it as to completeness or accuracy. This note may include candid statements, opinions and/or forecasts, including those regarding investment strategies and economic and market conditions; however, there is no guarantee that such statements, opinions and/or forecasts will prove to be correct. All such expressions of opinions or forecasts are subject to change without notice. Any projections, targets or estimates are forward looking statements and are based on CWA’s research, analysis, and assumption. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. This note is not a complete analysis of all material facts respecting any issuer, industry or security or of your investment objectives, parameters, needs or financial situation, and therefore is not a sufficient basis alone on which to base an investment decision. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this note. No portion of this note is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Investing entails the risk of loss of principal.
Comments are closed.