by Robert Holman | The Defensive Advisor | www.defensiveadvisor.com
EQUITY MARKET RATING … 4 (0-4 bearish, 5 neutral, 6-10 bullish).
Let’s talk about inflation. Inflation rates are released as 2 pairs in 2 series (4 numbers in all) that are important to monitor and understand. The pairs are ‘headline inflation’ versus ‘core inflation’ – the latter excludes the effects of two commodities, energy and food. The first can be influenced by politics and the second by weather, so they can be very volatile at times, and that’s why they are excluded from ‘core inflation’. The two series are the CPI – the Consumer Price Index versus the PCE – the Personal Consumption Expenditure Index.
Furthermore, there are monthly rates and trailing-twelve-month annual rates (so now we are at 8 numbers to monitor). Here are the latest numbers for each:
Headline Core Headline Core
CPI = Consumer Price Index
Monthly 1.2% 0.3% 0.8% 0.5%
Annual 8.5% 6.5% 7.9% 6.4%
PCE = Personal Consumption Index
Monthly ? ? 0.6% 0.4%
Annual ? ? 6.4% 5.4%
Note: PCE is released at month end (4/29 for April), CPI just before mid-month.
Mar Feb Jan Dec Nov Oct Sep Aug
Headline PCE Trends ? 6.4 6.0 5.8 5.6
Core PCE Trends 5.4 5.2 4.9 4.7 4.2 3.7 3.6
Headline CPI Trends 8.5 7.9 7.5
Core CPI Trends 6.5 6.4 6.0 5.5 4.9 4.6 4.0 4.0
Until there is a break in the upward movement in inflation data, the Federal Reserve will continue raising interest rates in an attempt to choke off inflation. Increasing interest rates slow economic growth, which slows corporate profits, which lowers stock prices.
Wall street is acting as if they believe March will be the peak month in inflation.
EQUITY MARKETS and the ECONOMY … Fear took over the markets last Friday, as statements by various Federal Reserve officials led to widespread predictions of a 75bp increase in the near future. Today the concern is about economic growth.
Alphabet (Google) and Microsoft report earnings today after the market closes. Will they be good enough to give the market the idea that it is being too pessimistic?
PORTFOLIOS … After reading this material, if you are unsure what to do with your portfolio, call me to discuss your circumstances and I’ll explain what ought to be done to help your situation. Just click here, and I’ll be happy to give you a complimentary portfolio evaluation along with a recommendation for two stocks to put into your portfolio.
I’ll also explain what’s good about your portfolio, how it’s likely to perform in upcoming months, and give you a couple of ideas for improvement, all at no cost to you.
Alternatively, you may contact me by calling 972-702-6032, and I’ll give you a way to securely email your portfolio holdings to me and I will input the data for the evaluation report.
TO MY CLIENTS … THANK YOU FOR YOUR TRUST. We’ve had great success since we started this RIA in mid-2018, and are doing better than the market return over the same time.
Excelsior Divitiae. Proverbs 21:5, 22:3, 27:12 and 3:56, Joshua 1:9, Ecclesiastes 8:7, 1Chronicles 12:32 and 29:11-13, and James 4:13-16.
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Opinions voiced in this post are for general information only and are not intended to provide specific advice to or recommendations for any individual, without complete knowledge of that individual’s total financial profile. No strategy assures success or protects against loss. Past performance does not guarantee future results.