Thankfully some analysts think that the burden could soon ease, and that we’ve reached an inflationary top.
This week, the Federal Reserve will meet and likely announce plans to raise interest rates, a tool used to combat rampant inflation. However, investors fear that accelerating the pace of interest rate hikes could drag the economy into recession.
Ryan Detrick, chief market strategist for LPL Financial, thinks it’s likely that inflation has already reached a peak on its own, and that the Fed could start to pull back on interest rates by the second half of the year.
Analysts at UBS also said this month that they expect inflation will likely peak in March and then fall “sharply.”
During the stagflation of the 1970s, both sticky and flexible inflation grew. But so far sticky inflation has remained relatively flat compared with flexible inflation, a good sign that this could still be temporary.
Of course, it could take some time for sticky inflation to play catch up, but Detrick says he’s optimistic. Flexible inflation is like a rubber band, he said, you can stretch it pretty far and it will still snap back.
And though shutdowns in China could hurt the global supply chain, it does appear that problems are easing — at least for now. If businesses can easily obtain more supplies, the prices of materials go down and consumers won’t be charged as much for goods and services, said Detrick.
The move lower in inflation could be sudden as a result, especially for durable goods, said Detrick. Still, he warned, it’s hard to tell if we’re seeing the light at the end of the tunnel — or an oncoming train.
Buffett and Munger’s big day
Investors flocked to Omaha this weekend for Berkshire Hathaway’s annual shareholder meeting, the first since 2019.
Between all of the ice cream cones and caramels, Berkshire disclosed Saturday that it bought more than $51 billion in stock during the first quarter of 2022, even though Buffett described his current investing mood as “lethargic.”
More than $3 billion of that was their own stock, but other big names included Chevron, Apple, Bank of America and American Express. Together, those four stocks are approximately two-thirds of the fair value of Berkshire’s nearly $388 billion portfolio.
Charlie Munger used his platform Saturday to speak out against bitcoin and cryptocurrency, which he compared to a “venereal disease” earlier this year.
Monday: ISM manufacturing; Construction spending; Earnings from Foxconn and Clorox
Tuesday: Job Openings and Labor Turnover Survey (JOLTS); Factory orders; Earnings from Match Group, Starbucks, Lyft and Airbnb
Wednesday: ADP employment report; FOMC statement; Fed Chair Jerome Powell news conference; Earnings from CVS, Dine Brands, Applebee’s, Yum Brands and Uber
Thursday: Weekly jobless claims; Mortgage rates; Earnings from Budweiser APAC and Kellogg’s
Friday: April Jobs Report; Earnings from Under Armour and Draft Kings