Over the past week we finally started to see the term “mild” being applied to the recessionary concerns we have been hearing about for several months now. I suspect the latest July CPI reading (consumer price index) of 8.5% to be the catalyst for these changes in rhetoric. Gasoline and energy prices moved significantly lower, which were the big contributors to the lower-than-expected number. While inflation pressures remain in place overall, we may finally start to see a reprieve in certain pricing pockets of the economy in a meaningful way. The June CPI reading was 9.1% so a drop to 8.5% in July is significant for many reasons. Many economists now believe we may have seen the peak in June as it appears that the Federal Reserve may indeed be on track in reeling in inflation. As expected, our financial markets responded favorably to this news and continued to show a general upward trend in price movements. We have seen a 4-week consecutive rally at this point from the June lows which is very encouraging. Have we bounced back to quickly? I believe this current rally will likely lose some steam in the weeks ahead once the balance of corporate earnings are released. Consolidation in market pricing metrics is normal and to be expected when you see a rapid rise like we have. In fact, it would be completely healthy to see this type of trading action in the weeks ahead as more economic data points are reviewed and digested. The Federal Reserve is in a relatively “quiet” period for now until they meet again in September. It is still widely expected that they will continue to increase interest rates, but perhaps at a more measured pace now that some of the data is showing signs of improvement. For now, it will be a watch and see game as summer vacations wind down and our lives return to their more normal routines.
I had the opportunity to travel to Boston over the past week where I witnessed busy airports and restaurants alive with activity. Healthy signs of a still strong economy with a resilient consumer willing to spend. My one interesting take away is that I noticed airline ticket prices have dropped significantly in the last month. I booked this particular trip on two weeks notice and the price had dropped substantially from when I looked a month ago. The drop in energy prices could easily explain the changes (fuel costs account for nearly 60% of an airlines operating expenses) but I do wonder if demand is also dropping. This is something I will be keeping an eye on. If you are looking to travel or get away this fall it might be a good time to revisit your plans and check costs again! Speaking of travel, if you ever wanted to go to Europe this may be the time to do it. For the first time in 20 years the Euro is actually trading below the dollar at .97, below the so called “parity” line. If your bucket list contains the words Paris, Madrid, or Rome you may want to consider a more serious look at your fall plans. I suspect this trend won't last and while the Covid fears and restrictions have begun to settle, the time may be ripe to take that trip of a lifetime. As we have all experienced in our own ways over the last few years, tomorrow is not promised.
It is refreshing to be able to write about more upbeat and positive things again. With the specter of more headline risks and a looming mid-term election ever present, it is good to soak in the sun and breathe. Enjoy these last few weeks of summer while they last. As we all know too well, Labor Day will be here and with that, our schedules will take on a new lease on life. Make the most of it!
Christopher E. Wasson, CFP®
Mosaic Asset Partners, LLC
1122 Kenilworth Drive, Suite 310
Towson, MD 21204
410.821.0089 fax 410.821.5993
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Mosaic Asset Partners, LLC is not affiliated with Kestra IS or Kestra AS.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.