While the inflation numbers were disappointing this morning, it is important to remember that it is a lagging indicator.
Why is this important? Because lagging indicators report what has happened not what will happen. However, the inflation print this AM instills fear in investors. That fear is predicated on what the Fed will do in the July meeting which scares market participants. The bond markets have already taken into account the Fed action of a 75bps increase. Other important lagging metrics are unemployment, hourly earnings, jobless claims, etc… but again, these are in the past.
Since markets look forward 6-12 months, it is more important to access future indicators. Stay focused on forward looking indicators like consumer confidence, purchasing managers index (PMI) and of course forward-looking corporate earnings. As of this writing, corporate earnings are looking to increase by about 7% in 2022. If there is a coming recession, it would be the first time the US recessed without unemployment increasing. The current job market shows that we have more jobs available than people to fill them. The economy will indeed slow, but we believe the US will not enter a recession at this time. We also have received through channel checks that supply chain issues should be resolved in the first half of 2023.
Valuations have come down to normal levels. Any further deterioration in the market valuation down to the June 17th low would be a good place to dip a toe in the water.
To learn more about family office, endowment , pensions or retirement plans , please call Lyle Himebaugh at 203-210-7814