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Markets Mixed on Key Inflation Reports; Bonds Down Thumbnail

Markets Mixed on Key Inflation Reports; Bonds Down

The markets were mixed last week with the Dow (+1.2%), NASDAQ (-3.1%) and S&P 500 (-1.5%).  Meanwhile, taxable bonds were down just over 1% and tax-free municipal bonds were down a little over 0.5%.  The real story last week was the Dow’s 1,500-point reversal on Thursday following the inflation report.

Key inflation numbers were reported last week for September, with the Producer Price Index (PPI) on Wednesday and Consumer Price Index (CPI) on Thursday, and neither set of data was encouraging.  The PPI exceeded economists’ expectations, as did CPI, with the latter being more commonly known and regarded among investors.  The CPI showed inflation dipped “only” to 8.2%, but the core CPI (excluding energy and food) rose 6.6%, the highest level since 1982.  September retail sales were also reported last week and while they didn’t go down, they were lower than economists’ expectations.  Thus, it appears that the consumer is still relatively healthy as the labor market remains strong.  However, inflation is having a dampening impact as consumers are becoming more cautious and have less discretionary income as wages fail to keep up with inflation.

All eyes will be turning to Q3 earnings season, which will be heating up.  It’s not just the corporate earnings, but how they project future earnings in this fragile economic environment.  If corporations show resilience, then that could be promising (or, less pessimistic), but if they begin to report reduced expectations, then that could be problematic for the markets.

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Michael Menninger, CFPAbout the Author: Michael Menninger, CFP®️

Michael Menninger is the founder and president of Menninger & Associates Financial Planning. With 20+ years of financial planning experience, Michael helps his clients pursue their financial goals through a hardworking, common-sense and detail-oriented approach to financial planning. He provides personalized service, builds lasting relationships, and maintains a disciplined, long-term outlook. He uses his experience and wide-ranging business and educational background as a basis for creating financial plans unique to each client's goals and aspirations.

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