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Market Snapshot 8.11.22- Inflation Has Peaked

Good Thursday AM,

Well, the leaves have seemingly turned. The headline number for PPI came in at a NEGATIVE .05%, and the Core PPI came in at only a .02% increase. Inflation has peaked?

This provides strong, further evidence that inflation has peaked.

The market flipped last week from projecting rate increases throughout 2023 to predicting rate decreases beginning in the first or second quarter. I still believe that the FED will regret the next rate increase and will walk it back before the end of the year or the beginning of next year. This means that the top is in for bond yields, but never forget that the market does not move linearly.

You should expect large swings when the final floor is put in for bond prices.

To make this more clear, even though we have likely seen the bottom in bond prices, the bottom is choppy We could see two steps forward and two backward for a while. Also, it goes without saying that if new signs of inflation appear, all bets are off.

Despite the softening inflation data, Federal Reserve officials responded saying it doesn’t change the US central bank’s path toward even higher interest rates this year and next. Minneapolis Fed President Neel Kashkari, who prior to the pandemic was the central bank’s most dovish policy maker, said Wednesday that he wants the Fed’s benchmark interest rate at 3.9% by the end of this year and at 4.4% by the end of 2023. Yesterday’s stock rally was fueled by bets that the Fed may turn less hawkish. Yet market observers cautioned that policy makers will want to see months more of evidence that price gains are slowing before they change their view. Economists are divided on whether slower CPI growth means the Fed could ease its aggressive rate-hiking program.

Bloomberg shares some great insight on rental costs. Including it below and it just screams out to say buying is a better choice.

What’s happening: Rental costs in the US are rising at the fastest pace in more than 40 years. This surpasses a median $2,000 per month for the first time and pushing prices in major cities above pre-Covid levels.

Why it’s happening: Demand has soared while inventory remains tight. In Atlanta, for example, an influx of new residents has helped drive up costs. It’s not helping that some would-be homebuyers are backing out of the market as mortgage rates jump.

Please remain safe and healthy, make today great!