Friday Market Update: June 16th 2023

Inflation Moves Lower, What Will the Fed do Next?

Happy Friday! Brian Manning here with your weekly update. Let's get right to it!

So, Monday this week was really relatively quiet with everyone just waiting to see what the Federal Reserve is going to do, and they concluded their meeting here on Wednesday, which we'll talk about here in a moment.

Tuesday this week, we got CPI. That's the consumer price index. There's two gauges of inflation that we receive on a monthly basis. CPI was the one we got this Tuesday. So... CPI moved from 4.9% down to 4%. There's a pretty substantial move in inflation. The core rate was only up 4/10th of a percent in total. So, the core rate, which strips out volatile items such as food and energy, move from 5.5 to 5.3.

The Federal Reserve is very much focused on the core rate because when you remove out volatile items, potentially it's a little bit more predictable. Used cars still up 4.4%. I mean, it just depends on the report that you look at. If you look at Manheim report, used cars are lower, but they're looking at a different report.

So unfortunately, you're still seeing some pressure there in used cars that's up 4.4%. You know, if you annualize that, that means your used car would appreciate 50% per year. Likely, that's going to change sometime here in the near future. We also got shelter. You know, we've been watching this and we've been watching it slowly crest. Shelter moved from being up 8.1% to 8%. So, really good to see that moving. It's a very slow-moving number there because it was a lag by about 12 to 14 months, but we are starting to see the cresting in shelter there.

We also on Wednesday of this week got PPI. So, PPI stands for the Producer Price Index. So, this measures inflation on the wholesale. PPI was expected to be down 1/10th of a percent. It was actually down 3/10th of a percent. The year-over-year number dropped down to 1.1% and the core rate moved from 3.2 to 2.8%. So, you know, none of these are scary inflation numbers. This is all actually inflation moving in the right way.

This is just a bizarre reaction from the markets. I think everyone is just afraid of the Federal Reserve right now. This is the third most intense decline of inflation in the last seven years. In fact... in the last eleven months, we have had inflation drop by almost 5%. So, we're seeing substantial moves in inflation. Fed rate hikes are helping, but... It's just there's this craziness with the Federal Reserve right now where they're very focused on inflation getting the 2%, and it's almost like they just want to break something such as the banking system before they get to this number because they're still semi focused on hiking rates again this year; maybe one or two more times. And I think even though we got really great inflation data, you're seeing inflation move in the right direction.

Markets are just kind of generally afraid of what the Federal Reserve is going to do for the rest of this year, because there's just uncertainty there. I'm around all weekend. If you have any questions, let me know. If you want to go through our strategic homebuyer consultation, give me a call. If you want to learn how we're closing purchase transactions in 12 days, reach out to me. Happy Friday. Hope you have a great day.

-Brian

303-500-3839

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