Headline inflation in May rose 8.6% from a year ago, accelerating from April’s 8.3% growth rate. The Consumer Price Index (CPI) rose to the highest year-over-year increase since December 1981. The spike in consumer prices were fairly broad-based but especially noticeable in gas and groceries. “Higher food costs will especially hit lower income consumers with another 1.4% increase in food prices from just one month ago,” warned LPL Chief Economist Jeffrey Roach. Dairy prices rose 2.9% month-over-month, the largest monthly increase since July 2007. A moderation in food prices will not likely come to fruition until geopolitical

Many pundits are issuing recession warnings and saying the economy is heading for a hard landing. Amid the cacophony of voices, we think the economy is slowing just like central bankers want but not shrinking. Further, we argue that a slowing economy is very different than a shrinking one. 

Economy Slowing, Not Shrinking

We believe the domestic economy will continue to grow this year. Other than the anomaly in Q1 GDP (gross domestic product), we think the economy has sufficient momentum to offset the inflationary pressures. “Our base case forecast includes an inflation rate that moderates as supply bottlenecks im

At the risk of sounding cliché, making the case for stocks to stage a second half rally back to the prior highs requires investors to see through some heavy cloud cover. If you prefer another market cliché, it’s times like these when investors need a crystal ball. We fully acknowledge how tough it is to see the bull case for stocks right now, and a retest of recent lows is certainly possible, but this week we lay out the bull case for the second half of the year. It starts with inflation.

The Wall of Worry Is Tall

Needless to say, it’s been a tough year. The S&P 500 Index started 2022 with its

The latest personal income and spending data from the Bureau of Economic Analysis show that part of the driver of spending growth in April was from savings. Another engine driving consumer spending was credit card usage but first, consider the savings rate.

Real consumer spending rose 0.7% in April, the fourth consecutive monthly increase in real spending.  The job market is tight, supporting consumer spending from gains in personal income, but the real cushion for consumers comes from excess savings accumulated during the pandemic. The savings rate in April fell to 4.4%, the lowest rate since 2008. But since the consumer is