The Week in Review: May 15, 2023
Easing Inflation, Stubborn Inflation
In the past, investors paid close attention to the monthly employment report. Today the focus has shifted to the CPI. Blame high inflation for the jump in interest rates, which has pressured the major stock market averages.
The U.S. Bureau of Labor Statistics reported that while inflation eased in April, it remains high.
The monthly rate of increase for the Consumer Price Index (CPI) was 0.4% in April. On an annual basis, it slowed from 5.0% in March to 4.9% in April. The core CPI, which excludes food and energy, also rose 0.4%. It eased from an annual rate of 5.6% to 5.5%.
Both readings are well above the Fed’s 2% annual target.
The results aligned with expectations, raising optimism that the Federal Reserve might not hike interest rates at its June meeting.
That’s a possibility, as the Fed has left its options open for June.
While fears of a recession are high and some cautiously encouraging internals were buried in the report, the Fed has yet to approach its goal of getting inflation back to 2%.
In Fed Chief Powell’s opening statement at his May 3 press conference, he was emphatic about snuffing out inflation. Twice he said the Fed remains “strongly committed” to getting inflation back to 2%— not just committed but ‘strongly’ committed.
The rhetoric was generally in line with remarks last year, suggesting the Fed isn’t finished. But he also said the Fed is “much closer to the end of this (rate hikes) than to the beginning.”
Besides, the banking crisis continues to simmer, and additional rate increases could further pressure regional banks that are struggling under the weight of negative psychology.
Minus the uncertainties swirling around the regional banks, more rate hikes would probably be in the pipeline.
Inflation is gradually easing but getting to 2% without a recession seems like a long shot. As the Wall Street Journal recently pointed out, some firms are taking advantage of today’s inflationary environment and boosting prices above rising costs simply because they can.
That could continue unless the economy slips into a recession, wages gains evaporate, and companies lose the ability to aggressively raise prices.
Two for the Road
Women currently hold 41 (8.2%) of CEO positions at S&P 500 companies. - Catalyst, February 3, 2023
Heart disease is responsible for one in every five deaths in the U.S. However, researchers revealed that between 1999 and 2020, the rate of deaths from heart attacks fell from 87 per 100,000 people to 38 per 100,000 people. Despite setbacks caused by the pandemic, the risk of death from America’s biggest killer of people has more than halved since the beginning of the 21st century. - StudyFinds, March 3, 2023
Stordahl Capital Management, Inc is a Registered Investment Adviser. This commentary is solely for informational purposes and reflects the personal opinions, viewpoints, and analyses of Stordahl Capital Management, Inc. and should not be regarded as a description of advisory services or performance returns of any SCM Clients. The views reflected in the commentary are subject to change at any time without notice. Nothing in this piece constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Advisory services are only offered to clients or prospective clients where Stordahl Capital Management and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Stordahl Capital Management unless a client service agreement is in place. Stordahl Capital Management, Inc provides links for your convenience to websites produced by other providers or industry-related material. Accessing websites through links directs you away from our website. Stordahl Capital Management is not responsible for errors or omissions in the material on third-party websites and does not necessarily approve of or endorse the information provided. Users who gain access to third-party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from the use of those websites. Please note that trading instructions through email, fax, or voicemail will not be taken. Your identity and timely retrieval of instructions cannot be guaranteed. Stordahl Capital Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
1. The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
2. The NASDAQ Composite is an unmanaged index of companies which cannot be invested into directly. Past performance does not guarantee future results.
3. The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
4. The Global Dow is an unmanaged index composed of stocks of 150 top companies. It cannot be invested into directly. Past performance does not guarantee future results.
5. CME Group front-month contract; Prices can and do vary; past performance does not guarantee future results.
6. CME Group continuous contract; Prices can and do vary; past performance does not guarantee future results.