Private Client Group

December 16th, 2024

Inflation Ticks Back Up, Old Cars On U.S. Roads, Coffee Futures Spike

Share
Subscribe

The end of the year is the perfect time for investors to start thinking about possible investment themes. In today’s Steady Investor, we look at three themes to consider for 2025:

Inflation Ticks Slightly Higher, Complicating Fed Outlook – The U.S. Bureau of Labor Statistics released November consumer price index (CPI) data on Wednesday, which showed prices moving in the wrong direction—but only slightly. The year-over-year CPI print showed a 2.7% increase, with the prices of consumer goods rising at the fastest monthly pace since mid-2023. This single point on goods inflation is notable, because price increases for goods have been improving for over a year, and this is the first setback on that trend we’ve seen in some time. To be fair, this blip in goods inflation was led by vehicle prices, which was partly driven in part by a sharp uptick in sales in Florida and North Carolina due to replacing damaged vehicles from hurricanes. Even still, rising goods inflation comes at a time when the incoming Trump administration is posturing to raise tariffs on key trading partners, which could raise input costs for businesses and result in higher prices for consumers. The core inflation data, which excludes food and energy prices, rose 0.3% month-over-month and 3.3% year-over-year. This inflation print was in-line with what economists were expecting but indicates a ‘stickiness’ to price pressures in the U.S. economy. As seen on the chart below, the transitory inflation forces appear to have been flushed out, and the “last mile” of improvements on inflation is proving challenging.1

Tax Planning? Get Our User-Friendly Guide for 2025

While tax planning might not be the most thrilling topic, it’s a crucial component of your financial strategy.

Our free guide, Tax Planning in 2025: A User-Friendly Guide2, aims to simplify the complexities of tax laws and empower individuals and business owners to make strategic decisions that minimize tax liability. It also covers a range of key tax issues, such as:

If you have $500,000 or more to invest and want to learn more, click on the link below to get your free copy:
Download Tax Planning in 2025: A User-Friendly Guide2

Source: Federal Reserve Bank of St. Louis3

America’s Cars are Getting Older, and Consumers are Buying Fewer of Them – There are more cars on the road in America than ever before, at about 290 million light vehicles. Many of them are old. One reason the ‘fleet’ of cars on America’s roads are getting older is that they’re lasting longer, which is good news generally for consumers. 30 years ago, the average age of a passenger car in the U.S. was 8.4 years old, and today that figure is significantly higher at 13.6 years. But this trend poses a problem for automakers and the industry, given that higher interest rates, inflation, and better-built cars means fewer buyers and total sales. As seen on the chart below, total annual light vehicle sales are running below historical levels. According to the Bureau of Economic Analysis, the four-year rolling average of annualized sales is about 15.5 million, compared to 17.7 million at the end of 2019.4

Source: Federal Reserve Bank of St. Louis5

One ancillary effect of longer-lasting, older vehicles is that consumers generally need to perform more maintenance on them over time. But once again, inflation and squeezed consumers on the lower end of the income spectrum show that many of the recommended service intervals are lapsing. Carfax recently said that 30% of cars on America’s roads were overdue for tire rotation with nearly 20% running late for an oil change. With an index for used vehicle sales up 36% in the last five years, the takeaway here is clear: perform the needed maintenance to take advantage of a relatively strong resale market.

Why Your Cup of Coffee May Be Even More Expensive Next Year – Consumers are feeling fatigued over the prices of many everyday items, with a cup of coffee being no exception. Prices may go even higher from here. Futures prices for high-end arabica beans blew past a record set in April 1977 and are up over 35% since October. Brazil is a key exporter of arabica beans, and a spell of hot, dry weather hit this summer just as Brazil’s coffee trees were bearing fruit and developing the next batch of buds. The result was a weak harvest, which has many speculators betting that next summer will also produce an uninspiring batch of beans. This speculation drives futures prices higher. It’s not necessarily all bad news, however. Coffee brewers often eschew more expensive arabica beans during periods of high prices and instead favor other varietals, like robusta beans and others that are sourced elsewhere, like Vietnam.6

Tax Planning in 2025 – Taxes may not be exciting, but they’re essential to your financial success. Our free guide, Tax Planning in 20257, simplifies tax laws and offers strategies to help you reduce liabilities and save more. Explore topics like:

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

Disclosure

1 Wall Street Journal. December 11, 2024. https://www.wsj.com/economy/cpi-report-inflation-november-interest-rate-d2520eaa?mod=hp_lead_pos1
2 ZIM may amend or rescind the free guide “Tax Planning in 2025: A User-Friendly Guide” for any reason and at ZIM’s discretion.
3 Fred Economic Data. 2024.

4 Wall Street Journal. December 6, 2024. https://www.wsj.com/economy/consumers/americans-used-cars-age-repairs-c3fe7dca?mod=djemMoneyBeat_us

5 Fred Economic Data. 2024.

6 Wall Street Journal. December 10, 2024. https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-nasdaq-live-12-10-2024/card/coffee-prices-break-47-year-old-record-B46Hi6BOWrhxLhos0DH2?mod=djemMoneyBeat_us
7 ZIM may amend or rescind the free guide “Tax Planning in 2025: A User-Friendly Guide” for any reason and at ZIM’s discretion.

DISCLOSURE

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. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.
READ PREVIOUS
The Growing Risk To Long-Term Investor Returns
READ NEXT
Mitch’s Financial Tips For The End Of 2024

Explore Zack’s Archives

View
Mitch's Mailbox
February 5th, 2025
Tariffs, Inflation And Bond Yields
Read more
Uncategorized
February 3rd, 2025
Fed Holds Rates Steady, DeepSeek Shakes Up AI, Housing Market Strengthens
Read more
Mitch on the Markets
February 3rd, 2025
How To Think About Tariffs In 2025
Read more
Uncategorized
January 29th, 2025
Fear of Spending in Retirement
Read more
Private Client Group
January 27th, 2025
Inflation News Mostly Good, Manufacturing Rebound, Consumer Holiday Spending
Read more
Mitch on the Markets
January 27th, 2025
Investors Are Becoming More Bullish–And That Is A Warning Sign
Read more

Daily financial tips directly
from the Zacks family.

Top

Search

Contact

I'm a Private Client I'm a Financial Professional