{"id":35936,"date":"2023-07-15T02:59:56","date_gmt":"2023-07-15T06:59:56","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/stock-market-could-be-in-trouble-if-the-easy-part-of-the-inflation-fight-is-over\/"},"modified":"2023-07-15T02:59:58","modified_gmt":"2023-07-15T06:59:58","slug":"stock-market-could-be-in-trouble-if-the-easy-part-of-the-inflation-fight-is-over","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=35936","title":{"rendered":"Stock Market Could Be in Trouble If the Easy Part of the Inflation Fight Is Over"},"content":{"rendered":"
\n
<\/p>\n
<\/p>\n<\/figure><\/div>\n

The last mile is the hardest, and that\u2019s true whether you\u2019re running a marathon or trying to tame inflation.<\/p>\n

You wouldn\u2019t know that from the market\u2019s reaction to Wednesday\u2019s inflation print, which saw the consumer price index rise just 3% in a year, the smallest increase since March 2021. The
\n Dow Jones Industrial Average
\n rose 2.3% this past week, the
\n S&P 500
\n added 2.4%, and the
\n Nasdaq Composite
\n jumped 3.3%. The two-year Treasury yield fell to 4.7% after topping 5% the previous week.<\/p>\n

\n

Annual inflation has come a long way. It peaked at 9.1% in June 2022, when prices were rising across nearly all categories of the CPI. These days, the decline is being driven by energy prices, which were down nearly 17% in June from a year earlier; prices of used cars and trucks, which fell 5.2%; and airline fares, appliances, health insurance, and footwear, all of which were cheaper than a year ago. <\/p>\n

But the drop has really been about inflation lapping some big months. The CPI soared 1.2% in June 2022 alone. Replacing that with June 2023\u2019s 0.2% month-over-month increase shaved a percentage point off the annual change.<\/p>\n

We won\u2019t see that next month, as the CPI was unchanged in July 2022. That means the annual change in the index will be higher next month if inflation is anything greater than zero. In fact, if monthly inflation averages its prepandemic, quantitative-easing-era average in the second half of 2023, the annual change in the CPI will be 3.9% in December, according to Bianco Research. It will look like inflation is reaccelerating.<\/p>\n

Stop us if you\u2019ve heard this before: The last push to 2% inflation is likely to be more difficult\u2014and rockier for financial markets. \u201cIndeed, the \u2018free disinflationary lunch\u2019 from rapidly falling energy prices, cooling food price inflation, and easing core goods inflation is now largely over,\u201d writes Gregory Daco, chief economist at EY-Parthenon. \u201cAny additional disinflationary momentum will have to come from slower month-over-month gains in core services prices.\u201d<\/p>\n

The next leg of disinflation will require some elusive loosening in the U.S. labor market, many economists say. It may take a meaningfully weaker overall economy to achieve that, testing the Federal Reserve\u2019s resolve to stay the course, while potentially weighing on stock prices.<\/p>\n

The Fed\u2019s rate-setting committee meets on July 25-26, and the futures market is pricing in overwhelming odds of a quarter-point increase in the federal-funds rate. We\u2019ll get two more months of inflation and employment data before the next confab on Sept. 19-20. For now, futures market pricing favors no change in rates.<\/p>\n

Progress is progress, but don\u2019t confuse it with victory. The Fed won\u2019t. <\/p>\n

<\/p>\n

Write to <\/strong>Nicholas Jasinski at nicholas.jasinski@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The last mile is the hardest, and that\u2019s true whether you\u2019re running a marathon or trying to tame inflation. You wouldn\u2019t know that from the market\u2019s reaction to Wednesday\u2019s inflation print, which saw the consumer price index rise just 3% in a year, the smallest increase since March 2021. The Dow Jones Industrial Average rose […]<\/p>\n","protected":false},"author":1,"featured_media":35937,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-35936","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\nStock Market Could Be in Trouble If the Easy Part of the Inflation Fight Is Over | iFintechWorld<\/title>\n<meta name=\"description\" content=\"The last mile is the hardest, and that\u2019s true whether you\u2019re running a marathon or trying to tame inflation. 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