Today the Bureau of Labor Statistics (BLS) released June’s Consumer Price index (CPI), a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. The CPI increased another 1.3% in June, following May’s increase of 1.0%. The year-over-year (YoY) increase is a whopping 9.1% and at an annualized inflation rate not seen since November 1981. That is certainly bad news for the Federal Reserve, which is determined to slow the CPI rise and, as expected, will most likely raise its discount rate at the next Committee meeting.
What Does This Mean to Me?
The stock market had a history of trading based on projected events 6 – 12 months in the future. Back in late December and January, when the stock market started to sell off, the stories of hyperinflation and rising interest rates were not common topics. However, true to form, six months later, the US economy is dealing with hyper-inflation and rising interest rates. Last week the stock market had three days the DJIA opened in the negative to end the day in the positive The major indices have a positive past 30-day return, and first occurrence this yea, NASDAQ, the hardest hit index, has performed nearly a 100% better than the S&P 500 during these past 30 days and possibly an indication that technology will be the faster recovering sector once markets resume their upward trend.
The potential for 2023 is dependent on the stabilizing of inflation and interest rates along with the average growth of corporate profit. Institutional investors are analyzing the prospects of 2023, and their favorable view will be revealed should the stock market start to recover by year-end. We maintain our long-term favorable view of the US economy and stock market. In the first quarter, we increased our average cash allocation to most portfolios by 14% (almost 10X average allocation) and looked for technical confirmations in trading activity that the market has reached a bottom and establishing a new upward trend. Give us a call or email us if you have any questions about this Brief or your account. We welcome the opportunity to be of service to you.