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Market Recap – May 13, 2024

Keel Point

May 13, 2024

Financial markets were steady last week, and the S&P 500 was up 1.85% from the prior week’s close and up 9.5% so far in 2024.  The April CPI reports on Wednesday, May 15, and core CPI inflation is likely to change only slightly from higher than expected than January – March inflation.  How stock prices and interest rates react is a big question. 

  • The April pull-back in financial markets from disinflation stalling, and crushing expectations of Fed interest rate cuts anytime soon, had driven S&P 500 stock prices down 5.5% April 1 – 19. Lower job growth, signs of economic slowdown, but strong first quarter corporate earnings growth, turned that around and S&P 500 prices now have rebounded 5.1% through last Friday.
  • Trending estimates for April core CPI inflation are for a 0.3% monthly increase and a still elevated 3.7% over the past 12 months. While the CPI is an important measure used in adjusting prices, rents and wages, the Fed uses core Personal Consumption Expenditures inflation (since 2012) for setting its interest rate policies.
  • The Fed is targetting 2% inflation, based on the core PCE metric, which currently is running a full percentage point below core CPI (PCE at 2.8% vs CPI at 3.8% in March), which is important to keep in mind when comparing the Fed’s 2% inflation target against Wednesday’s likely report of twelve month core CPI at 3.7% or 3.8%.
  • As we mentioned last week, the principal culprit in keeping core inflation elevated is how housing/shelter inflation is measured and why it has been slow to decline even as residential rental rates for new leases have come down. Without shelter/housing inflation, core PCE would have been 2.2%, and core CPI 2.4%, for the twelve months ending in March 2024.

The long-feared pandemic disruption to mothers working outside their homes seems to have fully abated with the opportunity to work remotely, at least part of the time.

From February to April 2020, mothers’ employment plummeted nearly 16% (BLS) with the fear that many would never return to the labor market.

The rebound in this segment of the labor force is providing  additional household income,  consumer spending, and a more robust labor supply to meet labor demand without further pressure on wages.

 

 

Data: BLS. Chart: Axios Visuals

Disclosure:  Securities offered through Keel Point Capital, LLC, Member FINRA and SIPC.  Brokerage and Investment Advisory Services are offered under the Keel Point brand. Investment Advisory Services offered by Keel Point, LLC, an affiliate of Keel Point Capital, LLC. While reasonable efforts have been made to provide data from sources considered to be reliable, no guarantee of accuracy is given. Keel Point does not give tax, accounting, regulatory, or legal advice to its clients.

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