Fortunately, some analysts believe that the burden may soon ease and we have reached an inflationary peak.
This week, the Federal Reserve will meet and likely announce its intention to raise interest rates, a tool used to fight runaway inflation. However, investors fear that the accelerating pace of interest rate hikes could push the economy into recession.
Ryan Detrick, chief market strategist for LPL Financial, thinks it’s likely that inflation has already peaked on its own and the Fed could start cutting interest rates by the second semester.
UBS analysts also said this month that they expected inflation to likely peak in March and then fall “sharply.”
During the stagflation of the 1970s, both hard and soft inflation rose. But so far, hard inflation has remained relatively stable relative to flexible inflation, a good sign that this may still be temporary.
Of course, it could take some time for persistent inflation to catch up, but Detrick says he’s optimistic. Flexible inflation is like a rubber band, he said, you can stretch it far enough and it will still come back.
And while the shutdowns in China may hurt the global supply chain, it looks like the problems are easing – at least for now. If businesses can easily get more supplies, material prices go down and consumers won’t be charged as much for goods and services, Detrick said.
The drop in inflation could therefore be sudden, especially for durable goods, Detrick said. Still, he warned, it’s hard to tell if we’re seeing light at the end of the tunnel – or an oncoming train.
Buffett and Munger’s Big Day
Investors flocked to Omaha this weekend for Berkshire Hathaway’s annual meeting of shareholders, the first since 2019.
Between all the ice cream cones and toffees, Berkshire revealed on Saturday that it bought more than $51 billion worth of stock in the first quarter of 2022, even though Buffett described his current investing mood as “lethargic.”
More than $3 billion came from their own stock, but other big names included Chevron, Apple, Bank of America and American Express. Together, these four stocks represent about two-thirds of the fair value of Berkshire’s nearly $388 billion portfolio.
Charlie Munger took to his platform on Saturday to speak out against bitcoin and the cryptocurrency, which he compared to a “venereal disease” earlier this year.
Monday: ISM manufacturing; Building expenses; Earnings from Foxconn and Clorox
Tuesday: Job Vacancies and Labor Turnover Survey (JOLTS); Factory orders; Earnings from Match Group, Starbucks, Lyft and Airbnb
Wednesday: ADP employment report; FOMC statement; Fed Chairman Jerome Powell’s press conference; Gains from CVS, Dine Brands, Applebee’s, Yum Brands and Uber
Thusday: Weekly jobless claims; Mortgage rates; Earnings from Budweiser APAC and Kellogg’s
Friday: April jobs report; Earnings from Under Armor and Draft Kings