Zacks Investment Management

In this week’s Steady Investor, we’re spotlighting key market updates that every investor should keep an eye on, such as:

• An update on the Fed and inflation
• See what factor is contributing to consumer spending
• OPEC+ agrees to oil production cuts through 2025

Fed’s Preferred Inflation Index Registers at 2.7% in April – The Federal Reserve’s preferred inflation measure, the headline PCE price index, rose 2.7% y/y in April—the same as March—with core prices up 2.8%. Every month, the PCE price index rose 0.3% in April, consistent with February and March’s prints.¹

Personal Consumption Expenditures (PCE) Price Index Year-Over-Year % Change, All Items

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This inflation data could be interpreted as neither positive nor negative. It showed that inflation was not getting any worse, but also that it didn’t get any better in April. As a result, the Fed’s stance on monetary policy in 2024 probably didn’t change. Looking beyond inflation, however, there was some data in the Commerce Department’s report that could soften the Fed’s stance on interest rates. Personal incomes rose 0.3% in April from March, which was a significant step down from the 0.5% month-over-month rate posted in March. Personal spending also decelerated quite a bit in April (0.2%), declining from a 0.7% month-over-month pace set in March. These figures also aren’t adjusted for inflation, meaning that incomes and spending were flat in April. This data was combined with a revised Q1 2024 GDP report, where the Bureau of Economic Analysis reported 1.3% GDP growth for the first quarter, down from the previous 1.6% estimate. Any signs of economic softening bolster the case for rate cuts later in 2024, especially if inflation does manage to come down a bit further over the summer.

A Factor That May Be Helping Consumer Spending: The Wealth Effect – The U.S. labor market remains tight, with the unemployment rate below 4% and incomes keeping pace with inflation. Plentiful jobs and higher wages have helped U.S. consumers continue spending over the past couple of years, but there’s another factor that could be supporting spending, and by extension, the economy at large: the wealth effect. Inflation has torn into the buying power of many U.S. consumers, but the higher interest rates that followed have also been putting unprecedented levels of passive income into the pockets of savers and investors. According to the Commerce Department, Americans earned $3.7 trillion in Q1 2024 from interest and dividends, which is miles above the $770 billion recorded in 2020. According to the Federal Reserve, the amount of wealth held in stocks, real estate, and other assets reached its highest level ever in Q4 2023. Higher overall levels of wealth arguably factor as a positive in spending decisions, even as inflation pushes in the other direction.⁴

OPEC+ Agrees to Oil Production Cuts Through 2025 – On Sunday, OPEC+ agreed to extend production cuts into 2025, in an effort to limit supply and keep a floor on prices. Back in April 2023, OPEC+ announced production cuts of 1.65 million barrels per day, which was set to expire at the end of the year. The group had also implemented additional cuts of 2.2 million barrels per day starting last November. All told, OPEC+’s cuts amount to about 5.7% of global crude supply, which is not insignificant but also is arguably not enough to have a dramatic impact on prices. Case-in-point: global oil prices have fallen by a little over 10% since OPEC+ started announcing cuts and amidst conflict in the Middle East. A key reason for oil price stability has been U.S. output, which hit a record in 2023. Other major, non-OPEC producers like Canada and Brazil have also increased production, neutralizing the impact of OPEC+ cuts.⁵

The market is ever-evolving, and knowing your net worth can be key to your financial health. By calculating your net worth, you gain a clearer picture of your progress toward long-term investment goals.

If you haven’t already, we recommend reading our free guide, Measuring Your Net Worth.⁶
You’ll get answers to important financial questions like:

• How do I correctly calculate my net worth?
• How does my net worth compare to other households?
• What strategies can help me grow my net worth over time?
• What are the risks and factors that can help me grow my net worth?

If you have $500,000 or more to invest, simply click on the link below to get your copy today!

Disclosure