author avatar
Mark Chandik

May 20, 2024

How Do Investors Spell Relief?

Weekly Market Commentary

Investors celebrated an ‘in line with expectations’ CPI that suggested the rate of inflation isn’t accelerating. It’s a small win, but it was enough to send the three major market indexes, the Dow, the Nasdaq, and the S&P 500 to new highs.

Last Wednesday, the U.S. Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 0.3% in April. The core CPI, which minuses out food and energy, also rose 0.3%. Both matched analyst expectations, according to the Wall Street Journal.

The core CPI slowed from 3.8% annually in March to 3.6% in April, the slowest pace since early 2021. The headline CPI eased to 3.4% annually from 3.5%.

So, why would stocks rally on a report that didn’t surprise anyone? Well, there were concerns that we’d see another hot CPI, something greater than 0.3% for the core rate.

That didn’t happen; call it a relief rally.

As the graphic illustrates, the monthly change in core inflation gradually turned higher in the second half of 2003, and it peaked in January.

While April’s milder reading is just one month (and it’s difficult to firmly establish a downward trend with April’s reading), the monthly numbers are no longer accelerating. And that’s good news.

But it’s also a hollow victory. A 0.3% rate over the next 12 months, if it were to occur, annualizes to about 4%. Inflation remains too high, and the current rate is not conducive to a reduction in interest rates unless the economy unexpectedly weakens.

However, let’s not be overly pessimistic either.

While a trip to the store or a restaurant may reveal another price hike, a stable fed funds rate and an expanding economy have helped drive stocks to new highs this year. On Friday, the Dow closed at 40,003.59, a new high and the first-ever close above 40,000 (MarketWatch).

That’s in stark contrast to what was happening two years ago.

author avatar
Mark Chandik

Reproduction Prohibited without Express Permission. Copyright FDP Wealth Management. All rights reserved. Advisory Services offered through FDP Wealth Management, LLC, a state Registered Investment Adviser and Valmark Advisers, Inc. a SEC Registered Investment Advisor. Securities offered through ValMark Securities, Inc., Member FINRA/SIPC. 130 Springside Drive, Suite 300, Akron, OH 44333-2431 800.765.5201 Prosperity Partners and FDP Wealth Management, LLC are separate entities from ValMark Securities, Inc. and Valmark Advisers, Inc. Prosperity Partners, FDP Wealth Management, LLC, ValMark Securities, Inc., Valmark Advisers Inc., and their representatives do not offer tax advice. You should consult your tax professional regarding your individual circumstances. Indices are unmanaged and cannot be invested directly in. Past performance is not a guarantee of future results.

Indices are unmanaged and do not incur fees, one cannot directly invest in an index. You should consult your tax professional regarding your individual circumstances. This information is provided by Financial Jumble, LLC. Financial Jumble, LLC is a separate entity from ValMark Securities, Inc. and ValMark Advisers, Inc.

RELATED POSTS

Looking Past the Pump: A Granular Look at Gasoline Prices

There are fears that higher prices will exacerbate inflation and hurt the economy, as cash that might have gone to other items will be diverted to the gas tank.

The War and Its Impact – So Far

What is the efficient market theory? Textbooks have been written to fully explain the theory. But if we can sum it up in one sentence: Assets, such as stocks, reflect all publicly available information. It is a foundational principle of finance.

Navigating Volatility

Over the weekend, global markets were shaken by significant geopolitical developments, as the US and Israel carried out coordinated strikes on Iran that resulted in the death of Iran’s Supreme Leader. Iran responded with missile strikes, which escalated tensions and heightened uncertainty in global markets.

Q4 Government Shutdown Drafs on GDP Supreme Court Blocks Tariff Plan

The government shutdown proved to be a far greater drag on the economy than earlier estimates indicated. On Friday, the U.S. BEA reported that fourth-quarter Gross Domestic Product (GDP), the largest measure of economic output, grew at a 1.4% annualized pace. This compares with a 4.4% annualized pace in Q3.

Revisiting 2025 Employment

The US Bureau of Labor Statistics published its final benchmark revisions covering employment during the 12‑month period between April 2024 and March 2025. The revisions showed that payrolls were revised lower by 898,000 jobs compared with the originally reported figures.