Consumer inflation rose during the month of August albeit at a slower pace than the previous month, reflecting the first slowdown in that particular metric for the year. A lot of questions have been raised on whether the current bull market can continue to sustain itself after the major indexes like the S&P 500 have reached record-breaking streaks.
Looking closer at the numbers, the Commerce Department reported that the Consumer Price Index (CPI) rose 0.2% during the month of August, but fell short of the expectations set forth by polled economists who forecasted a gain of 0.3%. The prevailing sentiment in the capital markets thus far is that the Federal Reserve is expected to raise the federal funds rate two more times before the end of 2018–whether or not the latest inflation numbers are enough to give pause to that notion remains to be seen.
Source: tradingeconomics.com
“Add in both yesterday’s muted producer price numbers and the less than enthusiastic appraisal from the Fed, and we now have three separate signals that the economy is not the runaway train some feared,” said Mike Loewengart, vice president of investment strategy at E-Trade. “In fact it suggests inflation is still in the Fed’s sweet spot as we march towards a normalized rate environment.”
Still, some market experts are looking at the latest inflation numbers as a temporary drop that could resume as the bull market continues to extend itself through 2018 and into 2019.
“Inflation has been showing signs of heating up, boosted by the strength of the economy and increasingly tight labor market conditions. The pace of price increases may have moderated in August, but that is likely to only be a temporary reprieve,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors.
The Dow Jones Industrial Average gained over 100 points as of 11:15 a.m. ET, while the Nasdaq Composite gained over 60 points and the S&P 500 rose over 10 points.
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