Two Steps Forward, One Step Back

November 10, 2022 12:20 PM By

The Fed's Strategy is Working

Just a quick thought today - 

This morning, the Bureau of Labor Statistics announced that inflation declined to 7.7% in October over the last 12 months.  After peaking in 9.1% in June, inflation has come down due to the Federal Reserve strategy of raising interest rates and reducing the amount of money in circulation.  Both CPI & the M2 money supply show considerable progress.  However, Jerome Powell has told us a number of times that there would be some pain for households and businesses along the way.  That means reducing demand will lead to lower spending, reduced production, and reduced headcount.  Layoffs are a part of the pain.  Take a look at this article to see some companies that have announced layoffs so far this year.

We're moving forward toward the goal, but remember... less bad is not the same as good.  I think we'll still have some challenges ahead.  This mornings sharp increase in the market is nice, but valuations still matter.  Keep your eye on how well the retail sector does this holiday season, and on earnings guidance moving forward.

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