Private Client Group

July 19th, 2022

Inflation Expected to Ease, Job Market Sizzles, Car Prices Rise

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The Fed continues to battle rapid inflation as investors’ worries grow. In today’s Steady Investor, we are taking a deeper dive into key factors that we believe are impacting this situation and the future state of the market, such as:

Expectations for Future Inflation Start to Ease – Inflation remains top-of-mind for consumers and market participants, and the June consumer price index (CPI) reading did not put any concerns to rest. According to the Labor Department, U.S. consumer inflation rose at an annual rate of 9.1%, which is the highest pace in 40 years and also marks the largest increase in the post-pandemic environment. The previous ‘peak’ was notched in May, when CPI hit an annual rate of 8.6%. Prices were seen rising across many categories in the economy, with gasoline prices again leading the charge with an 11.2% gain from the previous month. Forecasting the peak of inflation is a fairly futile exercise since so many extraneous factors like China lockdowns and the war are in play. But the Federal Reserve Bank of New York’s June Survey of Consumer Expectations showed that longer-run inflation expectations are coming down, and market-based inflation indicators – like the 5-year and 10-year breakeven inflation rate – have also fallen from highs. According to the New York Fed, expected inflation five years from now is 2.8%. Looking ahead in the shorter-term, commodity and in particular gasoline prices have fallen over the past few weeks, and retailers with too much inventory have notably been discounting in an effort to clear shelves.1

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Use Market Volatility to Your Advantage During this Potential Recession

Inflation has peaked once again, causing many investors to question their investments. Managing the ups and downs of inflation and volatility can be a huge challenge – especially now when there seem to be no positives.

The key is to take these challenges and learn how to navigate through them. As a long-term investor, I recommend focusing on factors that can help you achieve your financial goals.

If you have $500,000 or more to invest, get our free guide, “Using Market Volatility to Your Advantage” and learn our insights, based on decades of experience, about how a volatile market may be able to help investors refine their strategies and potentially generate solid returns over time.
 
You’ll get our ideas on:

Download Our Guide, “Using Market Volatility to Your Advantage”2

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U.S. Consumers are Paying More for Cars – The auto market has not been immune to inflation pressures, and in fact, has in some ways resembled the housing market over the past couple of years. Much like housing, the auto market has faced tight inventories in the face of swelling demand. Supply chain problems created a shortage of new vehicles, specifically rooted in a lack of semiconductors available to complete builds. That has put sometimes extreme upward pressure on the used car market, where prices have soared. It follows the U.S. consumers have been shelling out more for cars, with the average monthly payment on a car loan rising to an all-time high of $686 in June. This monthly payment is up 13% over the past year. Rising prices in the auto market are one reason payments are rising, but it is also tied to interest rates being used to finance purchases. The average annual percentage rate for new-car loans averaged 5.2% in June, which is up from 4.4% in February – before the Fed started raising the fed funds rate. That has caused consumers to stretch out the length of repayment periods, which ultimately means paying more interest on the vehicle.3

The U.S. Jobs Market Remains Red Hot – According to the U.S. Labor Department, the economy added 372,000 new jobs in June, keeping pace with strong hiring that has characterized the U.S. economy for years. The unemployment rate remained at a very strong 3.6%, which is only slightly higher than it was before the pandemic. The unemployment rate has steadied at 3.6% for the last four months, implying that the labor market is stable for the time being. Hiring was broad-based in June, with private employers adding jobs across all major industries. Increases were even posted in the retail sector, which has otherwise seen a slowdown as consumers shift purchases from goods to services. Hourly earnings also rose in June by 5.1% from a year earlier, as a tight labor market often gives workers more leverage to negotiate higher wages.4

Finding Silver Linings During High Inflation – Managing the ups and downs of inflation and volatility can be a huge challenge – especially now when there seems to be no end to the market madness. To help you discover silver linings during these turbulent times to better protect your investments, I recommend reading our guide “Using Market Volatility to Your Advantage.”5   

This guide can help you learn about our insights, based on decades of experience, about how a volatile market may be able to help investors refine their strategies and potentially generate solid returns over time.
 
You’ll get our ideas on:

If you have $500,000 or more to invest, download this free guide today by clicking on the link below.

Disclosure

1 Wall Street Journal. July 13, 2022. https://www.wsj.com/articles/us-inflation-june-2022-consumer-price-index-11657664129

2 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion

3 Wall Street Journal. July 9, 2022. https://www.wsj.com/articles/the-1-000-car-loan-payment-higher-prices-interest-rates-push-up-monthly-costs-11657364580?mod=djemRTE_h

4 Wall Street Journal. July 8, 2022. https://www.wsj.com/articles/june-jobs-report-unemployment-rate-economy-growth-2022-11657237512

5 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion


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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable.

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