The market’s perception of a downside inflationary threat is mostly from a slowdown in consumer price growth, a trend we think is temporary. Producer prices and wages have risen steadily over the past few months.- Ryan Detrick, LPL Senior Market Strategist
In this week’s Market Signals podcast, the focus is on stubbornly low inflation and what is and isn’t priced into the market.
Inflation in the US remains low, and that has many scratching their heads as to why. Here’s the catch according to our LPL’s strategists: consumer inflation is low, yet there are signs of inflation building at the wholesale level and in wages. They expect consumer inflation to trend higher and buck the lower trend.
As for what is and isn’t priced in, the answer could hold the key for the rest of 2019. GDP growth of less than 2.5% is priced in, as are the benefits from tax reform and low inflation. However, a stronger GDP, a pick-up in capital expenditures, and low unemployment sparking inflation aren’t currently priced in.
A deal with China is also priced in, but the potential for a good deal isn’t. Lastly, pressure on profit margins and growth stocks doing well are priced in. That means an uptick in earnings and value taking the lead over growth aren’t priced in here.
Many things are already priced into the markets here, but we feel there are some things that aren’t priced in, which could significantly impact equities and the economy for the remainder of 2019. The above is a list of what we feel is priced in and what isn’t priced in.
Listen to the entire podcast to get the LPL strategists’ take on what this all could mean for the economy throughout the rest of 2019. You can subscribe to Market Signals on iTunes, Google Play, Spotify, or wherever you get your podcasts.
If you’re a financial advisor and interested in learning how you can affiliate with LPL, talk to a recruiter now.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
The investment products sold through LPL Financial are not insured deposits and are not FDIC/NCUA insured. These products are not bank/credit union obligations and are not endorsed, recommended or guaranteed by any bank/credit union or any government agency. The value of the investment may fluctuate, the return on the investment is not guaranteed, and loss of principal is possible.
For Public Use — Tracking #: 1-843100 (4/20)