The Big Picture: Signs We’re Past Peak Inflation
Investors looking for a clue that we’re hitting peak inflation were disappointed with the June read. With expectations for 8.8 percent, the 9.1 percent number came as a shock.
However, that data is backward looking. The initial read is two weeks old at the time it’s published, and CPI data is often revised in the coming months. So it’s possible for a variety of reasons that we’re actually seeing the peak of inflation.
It may soon be in the rear-view for investors, and may allow the Fed to slow down its monetary tightening.
Companies are coming off two years of record earnings. The money thrown at the economy during the pandemic has kept the economy running hot. But it’s also created inflation that’s running across the board.
For now, companies have been able to pass along higher costs from inflation to consumers. And consumers have been able to pass it along. So that hasn’t impacted corporate earnings too much. That’s also why stocks tend to be a reasonable hedge against inflation.
In the current environment, the strength of jobs, consumer spending, and wages indicate that the economy is fairly strong. While there could be a recession, signs of a slowdown in inflation should move markets higher in the final months of the year.