Inflation’s impact on the stock market
Stocks can generally act as a buffer against the long-term impacts of inflation.
Last week’s economic data featured further contraction of the housing market as existing home sales and housing starts slowed again in September. Also, the index of leading economic indicators gave a stronger recession signal, but gains in industrial production suggest a downturn is still not imminent.
Prices for core personal consumption expenditures (excluding food and energy) are expected to increase moderately in September. Housing costs continue to rise as mortgage rates reset higher and house inventory remains low. More ambulatory procedures have led to a sharp increase in medical care inflation and are forecasted to stay above the two percent annual rate, a level not seen in the 2010s. The uptick in this important component is another factor delaying inflation’s retreat.
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