{"id":12868,"date":"2023-12-06T17:15:55","date_gmt":"2023-12-06T17:15:55","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=12868"},"modified":"2024-01-10T17:20:04","modified_gmt":"2024-01-10T17:20:04","slug":"inflation-is-improvingwhy-do-things-still-seem-expensive","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/inflation-is-improvingwhy-do-things-still-seem-expensive\/","title":{"rendered":"Inflation Is Improving\u2026Why Do Things Still Seem Expensive?"},"content":{"rendered":"\n

Laura H. from Concord, NH asks<\/em>: Hi Mitch, I\u2019m looking around for signs that inflation is getting better, but frankly, I\u2019m not seeing any. Everything still feels a lot more expensive and it doesn\u2019t seem like the inflation picture is under control. Does that mean interest rates need to keep going up, which is in turn bad news for stocks?<\/p>\n\n\n\n

Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n

Thanks for writing. Your question hits on two important features of the inflation picture: how consumers feel about prices, versus the rate of change of prices that the Fed cares about when setting interest rate policy. These two variables are quite different, for reasons I\u2019ll explain below.1<\/sup><\/p>\n\n\n\n

The first piece \u2013 how consumers feel about inflation and prices \u2013 is based on the accumulation of price increases over the last two-plus years. Very generally speaking, prices of goods and services are about 20% higher than they were pre-pandemic, which is basically impossible for consumers to ignore. Even though prices are increasing at more normal rates now \u2013 closer to 3% \u2013 prices have been reset higher. In other words, the starting point for supposedly \u2018improved\u2019 inflation is higher, and consumers feel that.<\/p>\n\n\n\n

Handling Volatility \u2013 What You Should Do in This Market<\/a><\/span><\/strong><\/p>\n\n\n\n

Handing volatility and inflation often results in emotional decision-making. For example, many investors rationalize that selling out of stocks is the surest way to avoid incurring further losses, but selling in many cases just locks those losses in.<\/p>\n\n\n\n

The real challenge is not in finding a way to eliminate volatility\u2014it is developing a mental approach to dealing with it. Our guide, \u201cHelping You Manage Market Volatility,\u201d will provide you with insights and tips to do just that. Get answers to questions like:<\/p>\n\n\n\n

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Just take a look at the chart below that shows the consumer price index for all items (dark red line), versus the prices of shelter (housing), and food. The things Americans care most about, arguably food and housing, went up more than the average. It makes sense that most folks don\u2019t feel good about this.<\/p>\n\n\n\n

\"\"
BLS3<\/sup><\/em><\/strong><\/figcaption><\/figure>\n\n\n\n

The second part of your question connects this negative feeling about inflation with the Fed and interest rate policy, but that\u2019s where you\u2019ve made a slight misstep. The Fed\u2019s goal right now is to get the rate of change<\/em> of inflation<\/em> down closer to 2%. They\u2019re not trying to get prices back down to where they were pre-pandemic \u2013 that would imply deflation, which is largely bad for the economy. On the goal of getting inflation back down to 2%, the Fed has seen major progress \u2013 with the headline PCE price index posting a 3% year-over-year increase in October.4<\/sup> This inflation print added to the conviction that the Federal Reserve was likely done raising rates in this cycle.<\/p>\n\n\n\n

One perhaps positive note I\u2019d add to my response is that there are some areas in the economy experiencing deflation, namely in \u2018durable goods\u2019 \u2013 these are items like appliances, furniture, and used cars. These are not the items consumers are buying every day, but there is some price relief happening that is helping the overall inflation picture. According to the Commerce Department, durable goods prices have fallen (year-over-year) for five consecutive months and were down -2.6% from their peak in September 2022. Specifically, the price of new and used cars fell -0.4% from September, home furnishings were down -0.2, and recreational goods like phones and computer equipment fell -0.4%. You may have also noticed pretty good sales at retailers this holiday season so far. I\u2019d expect that to continue through the end of the year.<\/p>\n\n\n\n

It is important to remember that factors, such as inflation and volatility, are a normal part of the ebb and flow of the markets. I believe the key is not to look for ways to eliminate it, but to develop a mental approach to dealing with it.<\/p>\n\n\n\n

Our Volatility guide, \u201cHelping You Manage Market Volatility5<\/sup>,\u201d will provide you with insights and tips to do just that. Get answers to questions like:<\/p>\n\n\n\n

\u2022 Market downturns can and will occur, but what should you do?
\u2022 How can diversification help you manage volatility without compromising your returns?
\u2022 When volatility is too much for you to handle, how can a money manager help?
\u2022 Can volatility actually be an opportunity?<\/p>\n\n\n\n

If you have $500,000 or more to invest and want to get answers to the questions above, click on the link below to download this guide today!<\/p>\n","protected":false},"excerpt":{"rendered":"

Mitch walks through the two components to the inflation picture\u2014how consumers feel about prices, and the actual rate of change in prices. <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-12868","post","type-post","status-publish","format-standard","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12868","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=12868"}],"version-history":[{"count":2,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12868\/revisions"}],"predecessor-version":[{"id":12871,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12868\/revisions\/12871"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=12868"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=12868"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=12868"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}