Aug 14, 2023

Lessons from the 1960s

Weekly Market Commentary

Fed Chief Jay Powell, along with other Fed officials, have been open about discussing the lessons they learned and the errors made during the 1970s.

The Consumer Price Index (CPI) jumped to an annual rate of over 12% in 1974 before falling back to 5% by 1976, per data from the St. Louis Federal Reserve.

However, the Fed became complacent, and it was forced to chase a rising rate of inflation, with the CPI hitting nearly 15% by 1980.

But what about the lessons of the 1960s? And how might they relate to our current situation?

Let’s start with last week’s report. The CPI and the core CPI, which excludes food and energy, both rose 0.2% in July, according to the U.S. Bureau of Labor Statistics.

It is encouraging to note that before rounding up, the monthly core rate increased by just 0.16% in June and July.

On an annual basis, the CPI increased 3.2% in July, up from 3.0% in June, while the core rate slowed from 4.8% to 4.7%. Both are still too high but are moving in the right direction.

Back to our original question—what about the lessons of the 1960s? The rate of inflation doubled between early and late 1966. However, the CPI slowed significantly in 1967, which we’re seeing today—see Figure 1.

Why did the rate briefly slow in the 1960s? The Fed engineered the perfect soft landing—a slowdown in economic growth, a stable jobless rate, and the avoidance of a recession.

Among other things, it was a triumph for monetary policy and the Fed.

However, the victory over inflation proved to be temporary, as prices resumed their upward march in the late 1960s.

While there are some similarities between the 1960s and the present day, it’s also important to recognize that there are differences, too. Besides, we don’t want to downplay recent progress on inflation.

But a repeat of the 1960s is best avoided.

Reproduction Prohibited without Express Permission. Copyright FDP Wealth Management. All rights reserved. Advisory Services offered through FDP Wealth Management, LLC, a state Registered Investment Advisor. Securities offered through Valmark Securities, Inc., Member FINRA/SIPC | 130 Springside Drive Suite 300 Akron, OH 44333-2431 | 800.765.5201. FDP Wealth Management, LLC is a separate entity from Valmark Securities, Inc. If you do not want to receive further editions of this weekly newsletter, please contact me at (949) 855-4337 or e-mail me at or write me at 8841 Research Drive, Suite 100, Irvine, CA 92618. FDP Wealth Management, LLC, Valmark Securities, Inc. and their representatives do not offer tax or legal advice. You should consult your tax or legal professional regarding your individual circumstances. Indices are unmanaged and cannot be invested directly in. Past performance is not a guarantee of future results.


How Do Investors Spell Relief?

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.

An Annual Ritual at the Gas Pump

You’re right if you have this nagging feeling that gas prices rise in the spring. As the graphic illustrates, on average prices rise through Memorial Day, plateau over the summer, and slip in the fall. This year is no exception, as prices echo the seasonal pattern.

Rate Cuts Still on the Table, Timing Less Certain

We often discuss the Federal Reserve and interest rates because both greatly impact investors. For starters, changes in interest rates have a significant impact on stock prices and income earned on savings. Sharply higher rates in 2022 pushed equities into a bear market.

Just Do It

That ubiquitous phrase from one of America’s most extensive athletic footwear and apparel makers seems to have been adopted by most American shoppers. The U.S. Census Bureau reported last week that retail sales jumped 0.7% in March, following a strong 0.9% rise in February.

The Road to Lower Inflation Takes a Detour

The rate of inflation is accelerating. That’s not how we hoped to start this week’s Insights. Take a moment and review Figure 1. The 4-month moving average has broken out of its long-term downward trend (red-dashed lines). On a monthly basis, prices bottomed in June and began to gradually turn higher. The upward trajectory picked up in January.