Contributed by: Angela Palacios, CFP®, AIF®
Is inflation transitory again? Transitory was struck from the Federal Reserve's language after inflation didn't dwindle for a few months. But depending on your definition of short and long-term, it could still be viewed as transitory. Headline inflation was lower than expected for July, and most of the reduction came from energy. You can see the breakdown by month below.
Source: JP Morgan Weekly market update, BLS, FactSet
Unemployment hits a multi-decade low. This equates to difficulty in the hiring process for firms. Job openings are declining, but there are still two job openings for each unemployed person.
Source: Raymond James Weekly Headings
Source: U.S Department of Labor, J.P. Morgan Asset Management. *JOLTS job openings from February 1974 to November 2000 are J.P. Morgan Asset Management estimates. J.P. Morgan Guide to the Markets – July 31, 2022.
Mortgage rates spiked and are coming back down, helping the affordability of buying a home again.
Source: Raymond James Weekly Headings
Yield curve inversion continues to steepen. There's much focus on the yield curve as it's usually an early signal for the economy slipping into recession (although technically, this definition has already been met with two negative quarters of GDP). This spells trouble for banks as they have to pay higher interest rates on short-term customer deposits like Certificate of Deposits but earn less on mortgages, for example. This money-losing gap can prompt banks to tighten up on lending.
Angela Palacios, CFP®, AIF®, is a partner and Director of Investments at Center for Financial Planning, Inc.® She chairs The Center Investment Committee and pens a quarterly Investment Commentary.
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