Dear valued client,
Markets lodged another week of gains as the Federal Reserve decided to pause interest rate hikes this week for the first time in 15 months. Chairman Jerome Powell maintained a hawkish tone in the press conference following the decision, insinuating two more possible increases before the end of the calendar year. The Fed realizes, however, that the full effects of raising the federal funds rate by five percentage points in just over a year takes a certain amount of time to permeate through the economy.
May’s CPI report, which played a role in the Fed’s decision, came in at 4% (compared to 4.9% in April and 9.1% in June 2022). Here’s a more in-depth look at the report:
- Cheaper energy played a vital role in lowering inflation; gas prices plunged almost 20% from a year ago when Russia’s invasion of Ukraine sent fuel costs skyrocketing.
- Extravagant spending following the Covid-19 lockdowns is waning. Consuming spending on vacations, leisure, and recreation is declining as airfare prices dropped 13% annually in May and hotel demand is below 2019 levels.
- Food is still expensive as its cost at grocery stores ticked up by 0.2%.
- Shelter costs are the most influential variable weighting on persistent inflation as rent/mortgage payments climbed 8.7% from a year prior.
Tech stocks are surging this year thanks to investments in artificial intelligence. Paul McCartney told the BBC this week that AI tools helped him use a demo recording of John Lennon singing an unpublished song to create one last hit by the iconic band that broke up more than 50 years ago. The name of the song has not yet been revealed, but fans are speculating that it will be “Now and Then,” one of the songs Lennon recorded in the ‘70s on a cassette labeled “For Paul” that Yoko Ono gave to McCartney after her husband’s death.
“The key to immortality is first living a life worth remembering.” – Bruce Lee
Have a terrific weekend,
PW
