Featured News

More Articles  Printer Friendly Version


Bad Inflation Surprise Sends Stocks Down Sharply

5034 2

The inflation crisis of 2022 grew more fearsome with Friday’s release by the U.S. Bureau of Labor Statistics of a worse-than-expected consumer price index (CPI) report. For the 12 months through May 2022, CPI shot +8.6% higher, the highest rate since the inflation crisis of the late 1970s and early 1980s.

Higher gas prices are the main factor. Meanwhile, other threats to U.S. economic growth linger, including the war in Ukraine, supply chain bottlenecks, and Covid subvariants. The unusual turbulence shortens runway room for a soft-landing and increases the chance of a recession, but the Federal Reserve still has a chance of convincing consumers that it will end inflation fast.

The Fed hiked rates a half-point on May 4. It’s expected to announce another half-point hike on Wednesday, June 15. Yet another hike is expected on July 27, and Friday’s worse-than-expected CPI release makes yet another half-point hike on September 21 more likely.

Friday’s bad CPI surprise came after a last week’s positive report on the Fed’s favored benchmark of inflation, the Personal Consumption Expenditure Deflater (PCED) index, registered a decline. That had raised hopes that a peak in inflation had occurred. Instead, the CPI increase in May was as bad as in April, rising by six-tenths of 1%.

Keeping the latest economic news in perspective, it’s important to remember that last week’s release of the Purchasing Managers Index (PMI) in the service sector, settled at its long-term historic norm. Services account for 89% of U.S. economic activity. In addition, the latest Leading Economic Indicator Index for the U.S. in line with long-term expectations for gross domestic product growth of 2.2%, unemployment remains very low, new-job creation is strong, and consumer balance sheets are strong. Thus, a soft landing could still unfold, or a short, mild recession.

Speculation about the Fed’s next move is a hot topic on cable TV, national newspaper, and social media networks. The Fed could hike rates more than a half-point on Wednesday. Seventy-five basis-point hikes are extremely rare but could occur on Wednesday. Or the Fed may not wait till Wednesday by raising rates this weekend. Exactly how the Fed will convince the nation that it will end inflation is unknown, but the Fed ultimately has always found a way to kill the scourge, even if it meant a recession.

5034 3

Inflation uncertainty sent the stock market tumbling today by -2.9%. The Standard & Poor’s 500 stock index closed this Friday at 3,900.86. The index dropped -5.18% from last week. The index is up +54.2% from the March 23, 2020, bear market low and down -20.6% from the January 3rd all-time high.

Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances.
The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.
This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.

Email this article to a friend

A Financial And Tax Planning Strategy For This Week's Stock Market Plunge
Having Trouble Tuning Out The Bad Financial Economic News?
A Key Signal Of Strength At A Pivotal Moment In Economic History
Despite Strong Jobs Report, Stocks Declined Last Week
The Fed Risks A Recession To End Inflation, As Expected
Stocks Snap Four-Week Win Streak
Stocks Have Soared Lately, But What Should You Expect Near And Long-Term?
Investing In An Economy Beset By Multiple Anomalies
Despite Bad Economic News, Stocks Rose 4% In The Week Ended July 29, 2022
Amid Bad Data Releases, Leading Economists Predict No Recession
Good News: Real Retail Sales Dropped Fractionally In The Past Year
Financial Economic News Analysis
The Good News Is All This Bad News
Four Signs A Recession Could Be Short And Shallow
Odds Of A Soft Landing Shrunk After Friday's News

This article was written by a professional financial journalist for Blattel & Associates and is not intended as legal or investment advice.

©2022 Advisor Products Inc. All Rights Reserved.

The articles and opinions on this site are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your advisor with regard to your individual situation.
All summaries/prices/quotes/statistics presented here have been obtained from sources we believe to be reliable, but we cannot guarantee its accuracy or completeness. Past performance is no guarantee of future results.
When you access certain links on the Blattel & Associates website you may leave this website. We do not endorse the content of such websites nor the products, services or other items offered through such websites. Any links to other sites are not intended as referrals or endorsements, but are merely provided to the users of the Blattel & Associates website for convenience and informational purposes.
Robert Blattel is a CERTIFIED FINANCIAL PLANNERTM practitioner. The partners of Blattel & Associates are not registered in all states. Please contact us to verify availability in your state. This is not an offer to buy or sell any security.
CFP® and CERTIFIED FINANCIAL PLANNERTM are certification marks owned by the Certified Financial Planner Board of Standards, Inc. These marks are awarded to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.
Securities and Investment Advisory Services offered through Cutter & Company Brokerage, Inc., 15415 Clayton Road, Ballwin, Missouri 63011 * (636) 537-8770. Member FINRA/SIPC.
Privacy Policy can be read at http://www.cutterco.com/privacypolicy.htm.