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 confirmed that inflation pressures are still strong and continue to erode consumer purchasing power. The latest housing data featured an explosion in new home sales (coinciding with a fall in mortgage rates), while initial jobless claims fell below 200,000 to suggest that the labor market remains extremely tight.
September job gains are expected to remain upbeat at 265,000 — albeit slowing from the recent robust pace of hiring. Service sector growth should again lead the way as firms continue to right-size from pandemic staffing losses in many industries. The unemployment rate should be unchanged at 3.7 percent while an increase in the labor force participation rate is expected — a positive sign as more individuals re-engage with the job market.
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