Inflation Data Under Expectations for the First Time in Months

May 17, 2024

Inflation Data Under Expectations for the First Time in Months

The Consumer Price Index (CPI) showed an increase of 0.3% in April from March, which was less than expectations of a 0.4% rise. Core inflation rose 3.6% on an annual basis, the lowest reading excluding – food and energy since April 2021.

The market has been closely watching inflation data, as the easing of inflation would enable the Federal Reserve to cut interest rates. Given the strength of the economy year to date and higher than expected inflation numbers before this month, the market has reduced expectations for interest rate cuts this year. As a result, interest rates have steadily risen throughout the year.

With the lower than expected inflation reading, markets reacted positively with both stock and bond markets rallying. If the economy stays strong while inflation eases, a soft landing will be achieved in the economy, which is positive for earnings growth in the market while interest rates fall. While this recent data is positive, a scenario still exists where the economy has to enter a recession to finally tame inflation, which would be more negative for risk assets. Inflation could also tick back up in the next reading, further pushing out Federal Reserve rate cuts.

Some drivers of the Consumer Price Index this month include shelter costs which are still running high at 5.5% versus one year ago. Services are also strong with transportation services up 11.2% and services excluding energy up 5.3%. Detractors to Consumer Price Index included used and new vehicle prices which were down 1.4% and 0.4% respectively.

Pallas Capital Advisors will continue to monitor macroeconomic trends to determine implications for balanced portfolios to help clients achieve their goals. 2024 is off to a strong start but risks still exist across the economy and geopolitical issues.

Important Disclosure:

The information contained herein is for informational purposes only, is not personalized investment advice and should not be construed as a recommendation to purchase or sell any particular security, sector or strategy to any individual person or entity. The decision to review or consider the purchase or sale of any security, sector or strategy mentioned should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional. Past performance should not be considered as an indicator of future results. Investment Advice offered through Pallas Capital Advisors LLC, a registered investment advisor.

CRN24_231

Mark-Bogar

Mark A. Bogar, CFA®, CAIA®
Chief Investment Officer
Pallas Capital Advisors

Stephen Kylander

Stephen Kylander
Senior Portfolio Manager
Pallas Capital Advisors

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The information contained herein is for informational purposes only, is not personalized investment advice and should not be construed as a recommendation to purchase or sell any particular security, sector or strategy to any individual person or entity. The decision to review or consider the purchase or sale of any security, sector or strategy mentioned should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional. Past performance should not be considered as an indicator of future results.

Investment Advice offered through Pallas Capital Advisors LLC, a registered investment advisor.

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