The 0.1% monthly and 4.0% annual headline CPI report was certainly nice. It indicated the slowest twelve-month change since inflation became a problem two years ago. HOWEVER…
The headline inflation was soothed by a 3.6% monthly drop in the energy complex. The Core CPI (excluding energy and food) clocked in at 5.2%, the second highest of the last six months. The six-month moving average also ticked higher.
Persistent core inflation should give the Fed pause about a pause.
Given the extent of rate increases over the last 15 months, the Fed can certainly justify a pause or a skip at any time in order to see what lagged affects are lurking out there. However, their fight does not appear to be over.
A pivot to lower rates is still off the table unless there is a major breakage in the economy or markets.
Annualize Monthly Core CPI
How Is Advanced Asset Management Advisors Approaching The Market Today?
We manage portfolios fundamentally, through the black and white statistics of market pricing and sector valuation. And despite a lot of noise and volatility in the market, the fundamentals haven’t changed to a degree that would warrant a pivot from the positioning we established ahead of the pandemic.
Our equity portfolios remain focused on large cap companies, tilted toward more defensive sectors with an emphasis on earnings (Healthcare remains a standout). In our fixed income portfolios, we remain positioned in short-term and high-quality debt instruments to reduce the risk to principal in a rising rate environment.
Do you have questions about the economy, the market, or our fundamental investment process? If so, we invite you to submit a question at engage@aamamail.com. We’d be happy to speak with you.
The information and opinions in this report have been prepared by the investment staff of Advanced Asset Management Advisors (AAMA). This report is based upon information available to the public. The information herein is believed to be reliable and has been obtained from sources believed to be reliable, but AAMA makes no representation as to the accuracy or completeness of such information. Opinions, estimates and projections in this report constitute AAMA’s judgment and are subject to change without notice. This report is provided for informational purposes only. It is not to be construed as a recommendation to buy or sell or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction in which such an offer or solicitation would violate applicable laws or regulations.
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