The last thing the stock market needs is more economic data, but that is exactly what we were handed on Wednesday. Let’s not forget, the root of all worries in the market is inflation, and inflation data was the thing we received. This is coming after a month where we saw the greatest rise in inflation in the last 40 years, and nothing has been positive since, although economists expected the April results to be lower.
The CPI April report was indeed lower, but not as low as we all wanted. Inflation fell to an 8.3% annual rate, down from 8.5% in March, but economists expected it to be at 8.1%, which was unfortunate. It’s now becoming a problem for all industries regardless of the supply chain, with things like airline fares jumping up by a whopping 18.6%. This is proved further with the core price index, which measures price increases while excluding food and energy due to their volatility. This rose by 0.6%, an increase from 0.3% last month, and the service side of the economy is feeling some big effects now. Benefits like wage growth are slowly falling under the carpet as inflation is outgaining these positives, and interest rates are going to have to combat this even though that has additional negative effects. The stock market ended the day down by more than 1 percent after a positive start, and that could be credited to one of the “relief days” we’ve talked about previously. Wednesday’s results did nothing except quantifying the problem and tackling it should be considered priority number one for the country.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
Originally published at https://invstr.com on May 12, 2022.