Zacks Investment Management

In this week’s Steady Investor, we’re highlighting important market news that we believe investors should keep an eye on, such as:

• Inflation picks up to 3.2%
• Growth in the U.K. economy
• Americans are more hopeful about retirement

Inflation Slightly Hotter Than Expected, But Doesn’t Change Rate Outlook – The U.S. Labor Department released the latest inflation data on Tuesday, and prices ran a bit hotter than expected. According to the consumer price index (CPI) measure of inflation, prices increased by 3.2% in February from a year earlier, which was slightly higher than consensus expectations for a 3.1% rise.¹

Source: Federal Reserve Bank of St. Louis²

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Digging into the numbers a bit more, we find that gas prices and ‘shelter costs’ accounted for over 60% of the monthly increase, which we would argue helps explain why the stock market rallied after the CPI report’s release. Gas prices are notoriously volatile, and do not factor much into the Fed’s thinking on underlying inflation. And we’ve written before that shelter costs play a much bigger role in the CPI calculation than they do in the Fed’s preferred inflation measure, the PCE price index. All told, the latest CPI release likely does not move the needle on the Fed’s outlook for rates, reinforcing the market’s expectations for three rate cuts in 2024. The equity market has also taken some level of solace in the recent jobs report, which included downward revisions to December and January payrolls and showed decelerating wage growth.  

The U.K. Economy Appears to Be Turning a Corner – The U.K. economy has been in something of a rut over the past few quarters, still struggling to fend off high inflation and experiencing a much less compelling post-pandemic recovery than the U.S. The tides may be turning. In January, the U.K. economy finally returned to growth, with GDP rising by 0.2% month-over-month – better than the 0.1% expected. This modest growth follows a contraction in the second half of last year, which was unique among the Group of Seven large rich countries – all of which saw expansion over that period. Flipping back to growth is an important development not only for the U.K. but also for the global economy, a signal that economic growth is broadening. The U.K. has a services-based economy where consumer spending is crucial, much like the U.S. It helps that real wages (adjusted for inflation) are rising again, up 1.8% in the three months through January.⁴

Americans are Feeling Better About Retirement – Many stories about retirement tend to highlight Americans’ overwhelming lack of preparedness. These stories still ring true today. But there are also some positive developments to highlight, which point to an improving retirement picture for many Americans. One study released this week from Vanguard illustrates these improvements. It found that Americans are saving into retirement accounts at record rates, with 43% of workers increasing the percentage of their paycheck saved into a 401(k) – compared to just 8% who decreased the percentage saved, and 2% who stopped altogether. One key factor that has been helping the retirement picture is automatic enrollment, which Vanguard says about 60% of its plans have. Of those plans, 60% of employees keep the deferral rate of 4% or higher. These trends, combined with a strong stock market in 2023, have led to average account balances at Vanguard increasing by 19% over the past year.⁵

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• Investments—including tax loss harvesting, loss carryover, investment interest expense deductions, and many more topics.
• Healthcare and Education—from the Child Tax Credit to Health Savings Accounts to 529 plans and more.
• Retirement Planning—Traditional and Roth IRAs, catch-up contributions, Required Minimum Distributions, and other essential topics.
• Charitable Giving & Estate Planning—Gifting strategies, Donor-Advised Funds, private foundations, and other ways to help yourself as you help others.

If you have $500,000 or more to invest and want to learn more, click on the link below:

Disclosure