LPL Financial Market Signals Podcast

Low Inflation and Market Pricing l LPL Market Signals Podcast

April 15, 2019

LPL Research

Listen as LPL Financial’s strategists discuss the current low inflation, what is and isn’t priced into the market, and how it all could play out the rest of 2019.

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

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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.

Chart - What's Priced IN and What's Not

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.

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