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The Wild Ride Continues... Thumbnail

The Wild Ride Continues...

The wild ride of 2022 continues...

Last week, hopes were high that May's inflation report would show signs that prices were beginning to stabilize. Those hopes were ceremonially dashed as the consumer price index (CPI) increased 8.6% from the same month a year ago (up from April's 8.3% reading).  This was the highest inflation reading since December 1981. 

Investors and consumers alike have been contending with elevated inflation all year long.  According to Moody's Analytics, inflation is costing the average American household an extra $460 per month compared to a year ago1.  Below are some of the key categories impacting household budgets:

Chart: Household expenses continue to mount as inflation persists

The unexpected jump in inflation to 8.6% reignited fears that the Federal Reserve would raise short-term rates further and faster than previously anticipated.  The news helped propel the S&P 500 to a new 2022 low as the S&P 500 entered an official bear market on Monday.

On Wednesday, the Federal Reserve increased its short-term interest rate target by three-quarters of a percentage point.  While not completely unexpected, the odds were favoring a half of a percentage point hike in the build up to the announcement.  The 0.75 percentage point move was the Fed's largest increase since 1994

Chart: The Fed funds target is on the rise

After the announcement, stocks cheered the Fed's efforts to tamp down on inflation as investors let out a sigh of relief that the rate hike wasn't even larger.  The Fed also indicated that 0.75 percentage point moves were unlikely to become the norm moving forward.

The joy didn't last long, as Thursday was a particularly ugly day for financial markets and the week ended on a sour note.

Such has been the story of 2022 so far. Investing is never easy, but in times like these it is particularly difficult.  We are sticking to our tried and true investing principals, maintaining our discipline and making adjustments as we see opportunities. We will make it through this together.  



1. Moody’s Analytics, https://nypost.com/2022/06/10/inflation-costing-americans-an-extra-460-per-month-analysis/

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