The latest inflation data came out yesterday and today. Producer Price Index (PPI) for final demand moved lower to 2.2% on a year over year reading. Consumer Price Index (CPI), for both overall and core, was 0.2% for the month of July. With that inflation number, core CPI on a 3-month, 6-month and 12-month basis all registered the lowest number since March of 2021. It certainly seems like the inflation battle is over for now and the Federal Reserve will set the stage for a new rate cut cycle at their Jackson Hole meeting at the end of next week.
Source: WSJ, as of 8/14/2024
Will they cut interest rates by 0.25% or 0.50% in September? That remains to be seen and will be determined by the labor market, as the risks move away from inflation and towards softening growth. On September 6th, the August jobs data will be reported, which will guide the Fed on the size of the rate cut, and a bad report will likely lead to a 0.5% cut.
The market had a muted reaction to this better inflation news after a nice retracement bounce over the last week, so investors seem to have moved on to growth as the main risk as well. Along those lines, underneath the surface some concerning issues remain. Defensive sector outperformance, a positive correlation between yields and stock prices, and some breadth deterioration in high-risk areas along with weak seasonality still have us expecting higher volatility for now. But with the higher probability of an economic soft-landing, a long-term bull trend in the market, and a new Fed easing cycle about to begin, stock investors should be rewarded with patience and/or dip buying.
Sean Dillon, CMT, CFTe
SVP, Investment Strategy
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.