markets remain volatile amid inflation readings

Posted by:

Comments:

Post Date:

Markets Remain Volatile Amid Inflation Readings

Global equities fell last week despite a late push on Friday. We saw global markets (represented by the MSCI All Country World Index) down -1.60% and domestic stocks (represented by the S&P 500 Index) down -0.91%.

Consumer Price Index and Inflation

Last week the Bureau of Labor Statistics released June inflation data including the Consumer Price Index (CPI). Both the headline CPI and core CPI (excludes energy and food prices) were higher than consensus expectations with readings of 9.1% and 5.9% year-over-year respectively. However, the core CPI did fall a modest 0.1% from the previous month. The US producer price index also rose 11.3% year-over-year for June with energy prices heavily affecting the overall reading. There were some bright spots including the price for chicken eggs falling 30.2%.

Treasury Rates

The US 10-year Treasury rate fell last week to 2.93%. As interest rates and bond prices have an inverse correlation, the Barclays US Aggregate bond index posted a positive 0.89% for the week. However, the inversion between the US 2-year and US 10-year treasury yield spread has widened to -0.20% which is the largest inversion since 2000.

Consumer Sentiment and Retail Sales

While consumer sentiment remains low, the reported US Retail Sales data last week provided light on the strength of the US consumer. Retail sales grew 1.0% in June which was higher than expectations showing continued consumer discretionary spending.

Consumer Finances and Unemployment

As inflationary pressures and recessionary fears continue to dominate headlines, the below shows the strength of consumer finances and where unemployment sits today compared to historical averages and periods of recession. This data is encouraging that if we do fall into a period of recession that it will be shallower based on the current strength of the consumer and labor market.

Source: YCharts as of 7/18/22

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.

Leave a Reply

Financial planning and Investment advisory services offered through Diversified, LLC. Diversified is a registered investment adviser, and the registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the SEC. A copy of Diversified’s current written disclosure brochure which discusses, among other things, the firm’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. Diversified, LLC does not provide tax advice and should not be relied upon for purposes of filing taxes, estimating tax liabilities or avoiding any tax or penalty imposed by law. The information provided by Diversified, LLC should not be a substitute for consulting a qualified tax advisor, accountant, or other professional concerning the application of tax law or an individual tax situation. Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.