In this week’s Steady Investor, we explore current market news that we believe investors should keep on their radar, such as:<\/p>\n\n\n\n
\u2022 Rate cuts might be delayed
\u2022 U.S. shoppers cut back in January
\u2022 Geopolitics creates uncertainty in oil markets<\/p>\n\n\n\n
CPI Surprises to the Upside<\/strong> \u2013 Last week, the U.S. Labor Department released a key measure of inflation for January, the consumer price index (CPI). Inflation ran hotter-than-expected. The consensus among economists was for a 2.9% year-over-year increase, but headline CPI came in at 3.1%. Equity markets experienced downside volatility on the day of the release, likely as investors recalibrated expectations for the timing and magnitude of interest rate cuts in 2024. At the beginning of the year, expectations were that the Fed would cut rates for the first time in March, but comments made by the Fed\u2014coupled with this latest CPI data\u2014have pushed that date back to June. Investors may assume this inflation report and the market\u2019s reaction register as negatives for 2024, but some additional context is needed. First, January\u2019s CPI print was still an improvement from December\u2019s, which came in at 3.4%. The downtrend remains in place, even if inflation did not fall quite as much as economists hoped. Second, there are components of the CPI reading that obscure what is happening with prices in the U.S. economy. The main culprit is sheltering costs, notably the owner\u2019s equivalent rent (OER) component. Shelter costs accelerated 0.6% in January from December, compared to December\u2019s 0.4% increase. This reading seems to contradict what we\u2019ve been seeing with rents tied to newly signed leases, which have been declining or remaining relatively flat. It\u2019s also true that if we strip out the shelter component, the year-over-year change in the CPI would have been 1.6%, well below the Fed\u2019s target. The upshot here is two-fold: first, we expect the shelter component and OER to decline in the coming months, anchoring CPI data as the year progresses; and, second, the Fed\u2019s preferred inflation gauge, the PCE price index, places a smaller weight on housing costs, so the hotter-than-expected reading should not factor too much in policy decision-making.1<\/sup><\/p>\n\n\n\n Questioning Your Next Investing Moves in this Current Market?<\/a><\/strong><\/span><\/p>\n\n\n\n Investors often fall into the trap of trying to buy \u201cat just the right time,\u201d or to sell stocks during a crisis when emotions are running high.<\/p>\n\n\n\n To help you make better investing decisions when fear sets in, I recommend downloading our guide, How Market Timing Can Affect Your Retirement Plan2<\/sup><\/em><\/span><\/strong>.<\/a> This guide explains common behavioral traps to avoid and offers potential solutions on what investors should do when investing in a volatile market.<\/p>\n\n\n\n