inflation

Stubborn child testing mothers resolve at breakfast

October 19 2022

Stubborn Inflation Tests Fed’s Resolve

Julie MurphyInvesting, Market feds, Financial Markets, inflation, investing, market

Stubborn doesn’t seem like a strong enough word, but that’s how Fed officials are describing inflation.

Inflation’s “stubbornness” has been on full display in recent weeks: First, the Producer Price Index (PPI) showed that costs remain high for producers of goods and services. Then in September’s more widely followed Consumer Price Index (CPI) high prices continued to persevere.

To address inflation, the Fed’s primary tool is short-term interest rates. As it pushes rates higher, the Fed aims to slow the economy by raising borrowing costs. As economic activity cools, the Fed expects to see the CPI and PPI trend lower.

In the table below, you can see what professional traders anticipate will happen with interest rates over the next year. They expect the Fed will have to raise short-term rates to nearly 5% in 2023 to lower inflation.

We know this year has had its ups and downs. Just when it appears to have turned a corner, something else happens, and the financial markets are under pressure again.

You may have heard the old saying: “Don’t worry about the horse, just load the wagon.” Now is an excellent time to stay focused on what you can control, like your “wagon,” and we’ll keep an eye on the “horses” in the meantime.

^{This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.}

Woman shopping during times of inflation

April 23 2022

Personal Finances and Inflation

Julie MurphyInvesting, Market, Retirement debt, inflation, interest rates, personal finance

If you have a balance on a credit card or an adjustable rate mortgage, you might be noticing changes in your payments. Higher interest rates are starting to ripple through the personal finance landscape, and it doesn’t look like that trend will change anytime soon.

The Federal Reserve has indicated it plans to keep raising short-term interest rates to help manage inflation, which is at its highest level in 40 years. You’re likely seeing the effects of inflation when buying gas or groceries, and you’ll notice it if you are shopping for a new or used car.

The Federal Reserve’s job is to control inflation. By raising interest rates, the Fed hopes to slow spending, bringing down consumer prices.

Time will tell whether higher interest rates will prompt us to consider changes to your portfolio. Remember, your overall strategy considers that there will be transition periods in the economy.

In the meantime, you may want to look at I Bonds, which are issued by the U.S. government and earn a fixed interest rate plus a variable interest inflation rate that’s adjusted twice a year. I Bonds have certain purchase limits, restrictions, and tax treatments, so they generally play a limited role in your financial picture.

If you have any questions about inflation or interest rates, please reach out. We’re always here to help put things into perspective.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2022 FMG Suite.

April 18 2022

Weekly Market Insights, April 18, 2022

Julie MurphyMarket inflation, market, stocks

Stocks posted losses in a holiday-shortened trading week as the first-quarter earnings season kicked off and investors digested new inflation data.The Dow Jones Industrial Average declined 0.78%, while the Standard & Poor’s 500 fell 2.13%. The Nasdaq Composite index dropped 2.63% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.20%.^1,2,3

Watching Bonds

Stocks began the week moving lower as bond yields climbed higher, with growth stocks suffering some of the steepest declines. Investors considered China’s ongoing lockdown warily, worried it might worsen supply-chain issues.

Historically high consumer and producer price inflation reports were shrugged off by the stock and bond markets in the main, with bond yields slipping despite the hot inflation numbers. Despite an encouraging start to the first-quarter earnings season, stocks pulled back on Friday as bond yields resumed their move higher ahead of a three-day holiday weekend.

An Eye on Inflation

On Tuesday, March’s Consumer Price Index (CPI) report offered little indication that inflation may be moderating, as prices increased 8.5% year-over-year, the fastest pace in 40 years. Core inflation, excluding food and energy prices, recorded a 6.5% jump, the steepest rise since August 1982. One encouraging note was that core inflation showed potential signs of ebbing, posting a monthly increase of 0.3% versus expectations of a 0.5% increase.⁴

The following day, March’s Producer Price Index, a potential insight into future inflation, rose 11.2% year-over-year. A March survey by the National Federation of Independent Business released earlier in the week, indicated that half of the respondents were likely to raise prices in the next three months.⁵

This Week: Key Economic Data

Tuesday: Housing Starts.

Wednesday: Existing Home Sales.

Thursday: Jobless Claims. Index of Leading Economic Indicators.

Friday: Purchasing Managers’ Index (PMI) Composite Flash.

^{Source: Econoday, April 14, 2022

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.}

This Week: Companies Reporting Earnings

Monday: Bank of America Corporation (BAC), J.B. Hunt Transport Services, Inc. (JBHT).

Tuesday: Netflix, Inc. (NFLX), Johnson & Johnson (JNJ), International Business Machines Corporation (IBM), Lockheed Martin Corporation (LMT), Prologis, Inc. (PLD).

Wednesday: Tesla, Inc. (TSLA), The Procter & Gamble Company (PG), Lam Research Corporation (LRCX), CSX Corporation (CSX).

Thursday: AT&T, Inc. (T), United Airlines Holdings, Inc. (UAL), Snap, Inc. (SNAP), Blackstone, Inc. (BX), Union Pacific Corporation (UNP), Dow, Inc. (DOW).

Friday: Verizon Communications, Inc. (VZ), American Express Company (AXP), KimberlyClark Corporation (KMB).

^{Source: Zacks, April 14, 2022

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.}

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March 20 2022

Inflation Math for Today’s Retiree

Julie MurphyInvesting, Market, Retirement inflation, investing, retirement

Retirement brings excitement as well as many concerns. You may have heard the saying, “inflation hurts savers and benefits borrowers.”

The expression suggests that borrowers benefit from inflation because they pay back lenders with dollars worth less than when the money was initially borrowed. But for savers, your hard-earned dollars may lose buying power over time.

One popular way to show the “hurts savers” illustration is with retirement calculators. A fixed amount of money will lose buying power at a much faster rate if inflation averages 7% versus 1% over an extended period.

That’s one reason why we caution against using some online tools. You can plug in a set of numbers, and the results may take you by surprise. They often raise more questions than answers.

If you’re concerned about inflation, please reach out. We work with a team of professionals who watch the trends closely, and we can help put today’s inflation in a better perspective.