- Scott Poore, AIF, AWMA, APMA
Inflation Declines and Bank Earnings Surprise
Equities were higher last week as initial banking earnings surprised to the upside and inflation continued to decline.
The year-over-year inflation numbers released last week, both Consumer Price Index and Producer Price Index, declined in March to mark the 9th consecutive month of declines. In the last 70 years, CPI has not declined in such fashion after peaking.
The obvious answer for such a decline would be the one anomaly in the last 70 years—COVID. The massive amounts of “free” money led to a spending explosion and we have come down off that spending high post-COVID. Retail Sales disappointed last week on a month-over-month basis, but remain elevated year-over-year.
The other shoe to drop last week were supposed bad bank earnings as a result of the banking crisis.
That too, disappointed the Bears last week as 4 major banks reported Q1 earnings—C, JPM, PNC, & WFC—that all bested analysts expectations. Usage of the Fed’s Discount Window and BTFP, which expanded during the banking crisis, have eased since the 2nd week in March.
The Atlanta Fed is projecting Q1 GDP growth at +2.2%, while not robust, also not a signal of an imminent recession. Equities may flirt with previous 6-month highs, which could result in a pause in the 4-week run the markets have been on lately. Expect some trading choppiness.
The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.
Forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
Any market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
Past Performance does not guarantee future results.