In 2022, near the height of the network news swirl on inflation fears, the OHFG investment team put out a piece of research trying to dispel the notion that inflation would remain at 7-8% for very long. That history said that the odds were high that inflation would peak and drop quickly, albeit not to 2%.
I’m Chris Perras, Chief Investment Officer with Oak Harvest Financial Group and this is our investment team’s mid-week release when we examine a news item, headline, or story making the rounds from publicly available sources and ask, “Is it News or Noise?” for your money. This week we give our thoughts on recent inflation data.
A Frustrating Topic
Viewers, this is a horribly frustrating topic for people like our investment team whose job and responsibility is to manage real money in the markets for our clients versus the academics, lawyers, and politicians who are making interest rate decisions at the Fed trying to right their currently poor reputation.
The central bank of the Unites States, our Federal Reserve controls short term interest rates, but their policies and public rhetoric have short- and long-term effects on investors. In an effort to reverse their bad reputation stemming from their 2021 overly easy monetary policies that caused a great deal of our inflation in 2022, they still seem to continue to want to look mainly at only lagging components in the CPI, such as wages and shelter versus the total basket or items that have led both up and down. The data, even the government data that lags, is irrefutable. The inflation impulse peaked last June and has been declining ever since.
Numbers Are Coming Down
In fact, much as we forecast and discussed in the second half of 2022, the CPI numbers are coming down in a very normal historic pattern and rate. Fast! We first discussed the historically “symmetrical” pattern of inflation rising and falling over prior cycles citing some research from Alpine Macro. It’s been almost 9 months since the CPI peaked around. It is now probing approximately 5% year to year in March and only .1% month to month.
Here is a updated chart of the symmetry in the CPI from Arbion research.
As one can see, regardless of the headlines on CNBC, Bloomberg, Fox news and Fed governor speak, the rate of change and level of the overall CPI is declining when and where it should. It mirrors similar inflation cycles including the 70’s and 80’s. This should be positive for risk assets including equities should Central bankers around the world pay attention to the leading, not lagging indicators of inflation.
Front page stories about inflation are news for your investments, for you and your family because it does drive investor sentiment and Fed actions. With that said, these stories about inflation, overall, are improving and should be helpful, not hurtful to your portfolios.
Are you trying to meet your needs or your greed’s in retirement? Give us a call here at Oak Harvest and schedule an initial consultation with an Oak Harvest Advisor. We will sit down with you and help you and your family do the math to figure out if you will be able to meet your retirement goals and needs.