“I see you in a different light, candlelight, moonlight,
I see you in a different way, through different eyes , and it’s so nice,
I see you like I’ve never seen you before,
The way I want to see you much more.”
- Chante Moore & Lamont Hailey
Good Morning: Since the Consumer Price Index (CPI) peak last June, the year-over-year change in the CPI has declined for a record ten straight months, surpassing the prior record of nine from back in June of 1931 (Source: BESPOKE). Since May of 2021, lumber prices have dropped 80% and are now 25% below the pre-COVID prices seen in February of 2020 (Source: BESPOKE). Thankfully, inflation has continued to decline each month since last July, which may mark a time in which the Federal Reserve could possibly end its interest rate hikes. The chart below shows the average returns 12 months “after” the past four interest rate cycles ended. Please be patient, as better times may be just around the corner.
There will hopefully be a resolution to the debt ceiling debate this week. All parties recognize the importance of their negotiations and are working hard to keep the country from potentially defaulting on its debts. The political whipsawing will likely result in choppy trading, but I believe an agreement will inevitably be reached. The looming June FOMC meeting is still on investors’ minds and remains a headwind for the equity markets. Several Fed officials have recently indicated that the vote will be a close call. Chairman Powell’s comments last Friday indicate he is leaning toward a pause. “We’ve come a long way in policy tightening, and the stance of policy is restrictive, and we face uncertainty about the lagged effects of our tightening so far and about the extent of credit tightening from recent banking stresses," Powell said. Stay tuned. Have a great week, and call with questions.
Source: Simpson, Kevin. “Debt Ceiling Talks Loom Over Markets.” Monday Morning Observations. Capital Wealth Planning. 5.22.2023.
“Markets Tend to Rally When Rate Hike Cycles End.” Spotlight on the Markets. PGIM Investments. www.pgim.com/investments/markets-tend-rally-when-rate-hike-cycles-end?utm_medium=email&utm_content=NS19952_week21_Newsletter_STATIC_IBD-All&utm_campaign=Newsletter&etid=184851277
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