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In June 2022, inflation reached its peak at slightly over 9%, but since then, it has decreased every month, with the April reading coming in just under 5%. These price movements provide some key takeaways.
Firstly, it's important to note that the Federal Reserve's target of 2% inflation hasn't been reached yet, and history offers a valuable lesson in this regard. The last time inflation was this high was in the late 1970s and early 1980s, and similar to the current situation, the Federal Reserve was slow to react, resulting in the Consumer Price Index (CPI) rising from 5.5% in 1970 to nearly 14% in 1980. It then took another six years, until 1986, for the Federal Reserve to bring the inflation rate below 2%.
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Inflation readings from 1970 according to investing.com
It remains to be seen if the current situation is truly different, but there are signs that the Fed is moving in the right direction. Unfortunately, over the last 18 months, consumers have faced high prices and investors have experienced losses due to economic events and the Fed's actions or inaction.
Looking back, we have experienced significant economic and financial uncertainty in the past three years, including a global pandemic that led to a technical depression, unprecedented fiscal and monetary policy, supply chain disruptions, shortages, Russian invasion of Ukraine, high oil prices, inflation reaching 9%, and the Fed raising short-term interest rates at a rapid pace.
Despite these challenges, the S&P 500 is only 14% off its all-time high, unemployment is approaching an all-time low, and inflation is receding. Most would think the data to be worse because of the negative news drumbeat. Reality is that it has been rough, but not as rough as we collectively feel.
Looking ahead, we are monitoring the regional bank crisis, which has caused more banks to become insolvent, and the looming commercial real estate issue. Additionally, we are aware of the debt ceiling issue, but we are not currently concerned and believe a deal will eventually be made. The past reliving itself so to speak.
From a positioning standpoint, we are holding short-duration bonds and slightly overweighting equities. Thanks as always for your time and feel free to follow up with any questions or concerns you may have. Enjoy the week!
Thanks
Frank Vance Retirement Capital Advisors
800 Battery Ave SE The Battery, Suite 100 Atlanta, GA 30339
Office- 412-722-3795
Securities and Advisory Services offered through Commonwealth Financial Network®, member FINRA/ SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network
Disclaimer: The term markets, market, S&P 500, or any other reference to financial markets are notional concepts and not specific investment advice or suggestion. This article does not constitute specific investment advice, and none is implied or inferred. This article is for clients of Retirement Capital Advisors only. Investing entails risk of loss of principal and no guarantee of returns are inferred or implied
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