Markets Remain Volatile Amid Inflation Readings

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.

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.