What to keep in mind regarding the recent CPI numbers.
Right now, many Americans are worried about their financial health due to the impact COVID-19 has had on the country. Adding to these concerns were July’s consumer prices— excluding food and energy—which rose at the highest rate in nearly 30 years. However, this jump may not be as scary as it looks on the surface.
We’ll get a better idea about the trend on inflation when the Consumer Price Index for August 2020 is released on Friday, September 11. But here are some factors to keep in mind.1
The 2% rule
According to the Bureau of Labor Statistics, core inflation is 1.6% year-over-year on an unadjusted basis. Some investors may view this as alarming given that this is the largest jump since January 1991. However, considering the Fed’s 2% target, this could be a relatively benign number.2
Inflation or Disinflation?
Chairman Powell made it known, following the most recent meeting of the Fed, that the board was wary of disinflationary pressures over inflationary ones. True, the Fed often takes a long-view approach, but this may still be positive news. Disinflation occurs when price inflation slows down temporarily. The Fed often uses this term when describing periods of slowing inflation.3
Mixed Opinions
Regardless, many professionals are divided over what this jump in price means. For some, it signals the American economy took a step toward recovery. For others, they believe inflation is already here and that July’s numbers are a warning shot across the bow.4
Despite recent headlines, many believe more data is needed before this can be called anything other than a data point. However, if you’re concerned about the trend in inflation, it’s never a bad idea to contact your investment advisor to learn more about inflationary pressures or to chat about the CPI numbers.
If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.
Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
11650 S. State Street, Suite 360
Draper, UT 84020
Citations.
1. Bureau of Labor Statistics, August 12, 2020
2. CNBC.com, August 12, 2020
3. CNBC.com, August 12, 2020
4. CNBC.com, August 12, 2020
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by MarketingLibrary, Inc., for Mark Lund, Mark is known as a Wealth Advisor, The 401k Advisor, Investor Coach, Financial Advisor, Financial Planner, Investment Advisor and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. a fiduciary, independent, fee-only, Registered Investment Advisor firm providing investment and retirement planning for individuals and 401k consulting for small businesses. Mark’s newsletter is called The Fiduciary Report. Cities served in Utah are: Salt Lake County, Utah County, Park City, Salt Lake City, Murray, West Jordan, Sandy, Draper, South Jordan, Provo, Orem, Lehi, Highland, Alpine, American Fork.
