In Markets "In a Nutshell"

Markets “In a Nutshell” for July 18, 2022

Investment Week at a Glance

Stocks finished lower for the week.  The Dow Jones Industrial Average fell 0.20%, the S&P 500 was down 0.90%, and the NASDAQ fell 1.60%. Foreign stocks (MSCI EAFE) were also down, falling 3.50%.  Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 2.92%.  (Data source: Wall Street Journal)

Inflation Comes in Hotter Than Expected

The June read on inflation was released last week and once again came in higher than expectations. Last month we saw CPI (consumer price index) rise by 9.1% compared to 8.6% in May and above the 8.8% estimates. This caused the market to take a dip as once again we are seeing we are not at peak inflation yet as some had thought. Investors worry the Fed may have to be more aggressive in their upcoming meeting which takes place next week. Some investors now believe a 1.00% rate hike is a possibility as the Fed has been unable to slow inflation as of yet, even after the Fed has raised rates by 1.50% already.

Has Inflation Peaked?

Although inflation continues to rise from previous months, we may start to see some relief in the inflation data. Oil has fallen to its lowest levels since the beginning of the invasion of Ukraine. Many commodities have also fallen from their highs as natural gas is down 28%, copper 34%, lumber 62%, and wheat 44%. Although this will not drastically drop the inflation data instantly, it may start to slowly bring down the inflation number to more reasonable levels. If we can start to see inflation come lower, markets could move higher in the hopes the Fed would not keep raising rates and possibly force the economy into a recession to slow inflation. Much attention will turn to the Fed early next week as we will see how much rates are raised.



When was the last time we saw inflation this high? (Scroll Down for Answer)

  1.    1925
  2.    1939
  3.    1981
  4.    2008



















Answer below.



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3.   1981.   In 1981 we saw inflation of 10.33% for the entire year. This inflation was stopped by Fed Chair Paul Volcker as he raised interest rates all the way up to 20%. This brought inflation down from 13.55% in 1980 to 3.21% in 1983.