Over the weekend you’ll be bombarded with headlines regarding this morning’s CPI report. The monthly number came in hotter than expected and our rolling 12-month 8.6% inflation is the highest we’ve seen since 1981. Under the fold you may read another staggering headline this weekend whereby the preliminary June reading for consumer sentiment came in the lowest since its 1952 tracking began. Worthy to note that this horrible sentiment does not correlate with employment data, indicating that faith in the future is not tied to a paycheck when that paycheck seems to be eroding monthly.
Markets responded as one would expect, however, the consensus among folks I speak with has little to do with any surprise surrounding the economic data but rather the response or rather lack-there-of from our current administration. Despite Oil trading over $120 per barrel this week and gasoline’s national average around $5.00 per gallon, our administration seems utterly out of touch. Regardless of what side of the aisle you may find yourself on, I am scratching my head at both.
One side seems to point fingers at Putin while refusing to recognize a failing domestic energy policy while the other side points to monetary issues and the Fed without accepting the ramifications of bi-partisan stimulus to the tune of trillions of dollars. Common sense tells us that if you shut down global production for close to two years, while at the same time giving folks thousands in free money, the result will be higher prices. Throw in an oil shock and an administration bent on eliminating fossil fuel, you have the CPI where it stands today.
From my vantage point, nothing will change until we see oil prices decline in a meaningful way. Unfortunately, this won’t transpire until either the administration switches its tune, or we see a resolution with Russia and Ukraine. If neither transpires any time soon, look for CPI to remain elevated, stocks to struggle and a dramatic shift in the political landscape come November.
I’m honored to have had the opportunity to appear on television today to talk about these tumultuous times. It’s not easy to take time out of the day to sit down for something like this but I genuinely enjoy having a historic timeline of how we handle certain environments. You can see today’s clip HERE.
As I mentioned on tv, despite the uncertainty wafting in the air, many companies are now trading at much more attractive valuations then just a few months before. Companies with healthy balance sheets and business models which are not going anywhere are now being thrown out by everyone when just a few months ago folks couldn’t get enough of them.
While it may not be in someone’s DNA to buy into the carnage, at minimum we should all be reminded to take a deep breath and remember just what is happening. Our country is going through a challenging time. Investors are concerned over the future and therefore are selling out of stocks for fear of future uncertainty. Price dislocation is the result. Appropriate allocation, diversification and a long time horizon can be a path to success.
The Dow currently stands around 31,000 which is certainly ugly when you consider we nearly broached 37,000 in January. That said, we’re a long way from the 2020 lows of 18,000. While I realize understanding the price action does little to alter the current mood, it certainly helps me to remember where we are and where we’ve been.