The Week in Review: March 18, 2024
Are We There Yet?
The road to price stability has been long and arduous. Inflation doesn’t just impact investors. It affects everyone, from shoppers to travelers to those on a fixed income.
February’s Consumer Price Index (CPI) marks the second straight month of stronger-than-expected inflation. The core CPI, excluding food and energy, rose 0.4% in January and February (U.S. Bureau of Labor Statistics). The CPI rose 0.4% in February and 0.3% in January.
We hope it’s a temporary setback, but the last two months signal that the road to price stability is taking an unexpected detour in the new year.
At a minimum, it suggests the Fed must be patient as it hopes to start lowering rates later this year. It could also bolster the idea that today’s interest rates may not be as restrictive as they would otherwise appear.
The graphic below illustrates that progress has stalled. However, it also shows that the rate of price hikes has gradually risen since the middle of 2023.
Others argue that the CPI’s shelter component does not correctly capture what’s happening to rent. They contend the shelter component is currently overstating costs. If shelter is removed from core inflation, prices are much more stable, rising at 2.2% annually over the last three months.
The bottom line is that investors are eyeing interest rates. If inflation stays elevated, any near-term reduction in rates is not likely.
Market Summary
Two for the Road
The S&P 500 has started the year positive in January and February 28 times since 1950. The benchmark average was then positive over the next 12 months in 26 of those instances. On average, when the first two months have been positive, the S&P 500 has delivered a return of 19.9% for the year.- Yahoo! Finance, March 4, 2024
As a rule, movies need to make at least 2.5 times their budget to run a profit. “Barbie" made back more than 14 times its $100 million budget. With the same budget, “Oppenheimer” made back more than nine times its investment. - Make Me Smart, March 8, 2024
Please do not hesitate to contact me with any questions or concerns. I hope you have a wonderful week!
Bill Stordahl, CFP®
Managing Director
Stordahl Capital Management
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