By
Steve Muchoki
April 16th, 2024
Government officials claim that, based on a month-to-month basis, the CPI increased by 0.5 percent in the month of July alone.
After surviving scary inflation fears over its value, Dow Jones Industrial Average and the S&P 500 have recorded a rise. Dow Jones recorded a total of 220.30 points, an equivalent of 0.6 percent of its total value, to move its total points to 35,484.97 — a new record.
On the other hand, the S&P 500, as well as Dow, recorded a 0.2 percent increase to move to a total points of 4,447.70. The new record of S&P is an all-time high. As for the technology-heavy Nasdaq Composite, it recorded a rise of over 0.1%, which is way lower to 14,765.14.
According to economists surveyed by Dow Jones, the July Consumer Price Index, which was released on Wednesday, indicated that prices have jumped by 5.4 percent since the turn of the year.
Government officials also claim that, based on a month-to-month basis, the CPI increased by 0.5 percent in the month of July alone. Further data indicate that CPI generally rose by 0.3% last month, below the 0.4% increase expected. Core prices still jumped 4.3% on a year-over-year basis. This data notably excludes energy and food prices.
However, investors were undoubtedly placing emphasis on the primary rate of inflation. This emphasis obviously indicates that inflation will remain tempered while the state of the economy will remain strong.
According to Mike Loewengart, who is the managing director of investment strategy at E*TRADE Financial, it’s encouraging to see the pace moderating a bit month over month thereby supporting the notion that recent price increases are transitory and reopening related.
So while inflation continues to run hot, its likely that investors are already pricing it in.
Used car prices, which investors have been watching as one sign of out-of-control inflation, rose just 0.2% in July after surging more than 10% in the prior month,”he noted.
Seema Shah, the chief strategist at Principal Global Investors, opined that the latest data should help assuage investor fears that the Fed is too laid-back about inflation pressures.
Shah maintained that the details of the data release suggest some easing in the reopening and supply-shortage driven boost to prices, and tentatively suggests that inflation may have peaked.
“Investors in the transitory camp will feel slightly vindicated,” he maintained.
The inflation reading supported the Federal Reserve’s belief that high price pressures are transitory as the economy recovers from the pandemic-triggered recession.
Per CNBC, Barry Gilbert, an asset allocation strategist at LPL Financial said “widespread vaccine distribution and distancing measures have helped limit the variant’s impact, but we could still see some drag on economic growth as some restrictions are reintroduced and consumers potentially become more cautious.”