Inflation numbers were issued last week, and they came in hot as expected. The interesting thing was that after the report was released, the phrase “peak inflation” was frequently referenced by investors and economists. The rationale for this is that data in the report indicate a slowing of growth in prices. Allow me to explain.

The March Consumer Price Index (CPI) report showed that inflation increased by 8.5% year-over-year and 1.2% month-over-month, with energy leading the way (see image below). This was expected because of the sanctions imposed on Russia due to the Ukraine and Russia conflict. Core CPI, which excludes food and energy because of their volatile price fluctuations, came in at 6.5% year-over-year and only 0.3% month-over-month. Since September 2021, this was the smallest month-over-month increase and the reason why analysts believe we have reached the “peak.”

I’d like to point out that inflation is still at a four-decade high, therefore prices are still inflated. But this report offers a glimmer of hope that inflation will begin to moderate soon. It may take some time, but the data suggest that the future may not be as costly as we previously believed.

We’ll be paying close attention to company earnings in the following weeks. Second-quarter earnings season has begun, with banks leading the way. Although banks often provide insight into what earnings will look like for the quarter, I’m not convinced that’s the case here. This is because they don’t buy materials to produce a product or anything else that requires a tangible asset. And that’s what we are most curious about. Observing how businesses will be able to maintain growth when input costs rise. Will they pass those expenses on to their customers, or will they choose to decrease expenditures elsewhere in the organization? I don’t think every company will be able to achieve this. Only those who are market leaders and have the ability to set prices. Seeing these figures will help us make more reasonable predictions about how much our economy will grow in the future.

Yes, I anticipate a slowdown in our economy as interest rates rise. However, I don’t believe we will enter a recession in the near future. With a forecasted GDP growth rate of 6.5% for the year, I suspect it will be difficult for us to enter a recession unless some unforeseen circumstance occurs. Inflation is arguably the most pressing problem right now, but it appears to be getting better. It may not be across the board, but it is in some parts. It’s also important to note that if growth slows, you shouldn’t be concerned. It’s a good thing. It suggests that things are returning to normal and it will help supply to catch up with demand.

– Andrew Ochoa

Advisory services offered by Apriem Advisors (“Apriem”), a registered investment adviser with the United States Securities and Exchange Commission in accordance with the Investment Advisers Act of 1940. Any reference to or use of the terms “registered investment adviser” or “registered,” does not imply that Apriem Advisors or any person associated with Apriem Advisors has achieved a certain level of skill or training. Apriem Advisors may only transact business or render personalized investment advice in those states and international jurisdictions where we are registered, notice filed, or where we qualify for an exemption or exclusion from registration requirements. For complete information about our firm, please refer to our Form ADV Part 2A, 2B and CRS at any time.

All charts and data from Bloomberg unless otherwise indicated.

The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. Past performance is no guarantee of future results. The reader should not assume that investments in the securities identified were or will be profitable.

Copyright © 2022 Apriem Advisors, All rights reserved.