Hello Again - The CPI for March was just 1/10th of 1% increase month over month. That’s a nice low reading. Year over year it is still 5%, but that’s still the lowest year over year reading in 2 years. In other words, the interest rate hikes are working to curb inflation. Money is coming out of the system and things are slowing. That’s good news.
Of course there is still a risk of recession if the Fed keeps raising rates and kills the economy. But there is very much the potential for the economy to experience a soft landing (brief short recession), and that’s exactly what they are trying to do. They want to bring inflation down to about 2% annually without a big jump in unemployment. So far so good at this point.
What does it mean for the stock market? The stock market hates inflation, so the fact that it is coming down is a good thing. On the flip side, the stock market loves stability. So a soft landing is the ideal situation. If it happens, then we could experience a goldilocks scenario in which stocks start trending higher and don’t stop for a long, long time.
In my humble opinion, this remains the best buying opportunity in the past 15 years, and the people that have enough courage to embrace this market down here with their long-term investment dollars, may be able to thank themselves one day, and their heirs may too!
You can see the S&P 500 chart has been resilient and is right back up kissing the blue line Again. Will it go through it? Stay tuned!!
Best Regards,
Mike