Has inflation peaked?

Australian shares are poised to rise 1%, taking direction from New York as stocks surged after the annual pace of headline inflation slowed in July from June, seen as easing pressure on how much US interest rates must rise still.

The official annual inflation rate declined to 8.5% down from 9.1% - which was a bigger reduction than most experts expected.

However, we aren’t out of the woods yet, with further headwinds to bring more volatility, despite the VIX (which measures volatility) tumbling more than 9%, trading below 20 for the first time since December 2021.

Many experts have stated that inflation cannot be reigned in without the US falling into a recession.

However, earnings expectations haven’t taken a hit yet to reflect a recession.

Other indicators are still mixed, with US unemployment still trending down, however the jobless market numbers have been trending up since April (up 30%).

When US goes into a recession, it will have flow on affects on Australia. Particularly with unemployment jumping sharply.

This will also cool upward pressure on rising interest rates. the next few months may provide good opportunities. Opportunities in the property market, and opportunity for retirees to lock in annuities and term deposits at higher rates.

So…. Enjoy the market rally today but beware of the volatility coming. We aren’t out of the woods yet.

Any questions please reach out.

sources:

https://www.afr.com/markets/equity-markets/asx-to-rise-a-leaps-on-us-rate-rethink-20220811-p5b8wp

https://www.afr.com/world/north-america/us-inflation-slips-from-40-year-peak-but-remains-high-at-8-5-percent-20220810-p5b8w4

https://www.cnbc.com/2022/08/09/stock-futures-tick-up-as-investors-brace-for-july-inflation-report-.html

https://www.wsj.com/articles/us-inflation-july-2022-consumer-price-index-11660077986?mod=hp_lead_pos1

Has Inflation Peaked?