Have you ever been on a diet? They all go great to start; next thing you know, you have only 10 more pounds to lose…and then it all slows down. So it goes with the Fed’s fight against inflation. CPI and PPI both came in this week slightly higher than last month. Does this mean the battle is lost? Unlike last month’s inflation surprise, the market has thus far shrugged it off.
The market dropped dramatically on Tuesday because of the “HOT” inflation report – CPI indicated that inflation is running at an annual rate of 3.1 percent. The market pundits remain fixated on the Fed and interest rates, worrying that a slower drop in inflation means rates stay put for longer. In our opinion, this worry is misplaced.
We have written all year about the frustration of false narratives and a misleading S&P 500, yet it has ended on a much brighter note: Patience has paid off, and finally the onslaught of solid economic data paired with slowing inflation has made the bears change their tune. What will 2024 bring us?
If I have a gift as an investor, it is to always question the narrative and favor reality. This trait, thanks to my parents, has served me well during my more than 30 years in the investment industry. It is also why I have found 2023 to be so frustratingly maddening. Yet it is Thanksgiving once more, and we have much for which to be thankful.
What was the most important moment in Jerome Powell’s post-Fed meeting comments this week? When a reporter asked about the Fed staff removing recession from their forecast, Powell responded, “It is hard to see a recession when one looks at the data.”
