Categories: Stock Market
Topics: Inflation Stocks

Is a Recession Still Coming?

Last week, the markets paid attention to two numbers: 0.5% and 6.4%. 

These were the monthly and yearly inflation numbers, respectively. So January saw inflation rise 0.5% over the month prior while it was up 6.4% from the year before. 

While there was a good amount of hand-wringing over the yearly number especially, it was still down from the 9.1% annual rate in June. 

That, according to Fed Chair Powell, is a sign that the ship is righting. 

“The process of getting inflation down has begun,” he said, before stating that it “is likely to take quite a bit of time” and “it’s probably going to be bumpy.”

He probably doesn’t need to tell the average person that. A trip to the grocery store is all most people need to know that this is still a problem. 

But even when you account for the fact that eggs were up 8.5% (70% over a year, for those interested), price decreases have been happening in other areas. 

Airline fares fell slightly, as did used car prices and the price of fruits and vegetables. 

In other areas, the price increases were still there but slower than in December. So it’s a long, grueling ordeal that still has plenty of road ahead, but if the recent trends are to be believed, then we may have reached a turning point. 

There is evidence that many of the factors that led to this inflationary pressure are subsiding. 

You don’t hear about supply chain issues nearly as much as you used to because those have largely been resolved. Shipping costs have also come down far from recent peaks. 

Beyond that, think about how many people had more money in their pockets thanks largely to government stimulus. A lot of that was being spent on things like cars and electronics because they suddenly had the funds to do it. 

That money has all but dried up and spending habits have changed from goods toward services for many. There will be some resistance as the supply chain recovers and spending habits shift, especially with China reopening after COVID lockdowns, but this does point to the Fed’s argument that things are slowly improving. 

The big thing to watch will be wage growth, which the Fed has said is one of the key metrics still acting as a roadblock to desired inflation levels. That rate of growth, too, has been slowing according to recent reports and is being pointed to as another sign that we might be on the right track. 

If you noticed, there isn’t as much talk of an impending recession as there was just a few months ago. There’s more talk now of a “soft landing,” a slowdown that avoids recession. 

That talk seems to have been getting a bit louder, especially in the last few weeks or so, but there’s nothing to say that confidence will last. 

We’re heading into a strange period where the signs are conflicting when it comes to the true health of the economy. Essentially, things could go one way or the other so investors need to be ready for anything. 

That includes strategic investing that can thrive in this strange new world we’re heading into. 

With the market being the way that it is, it’s increasingly up to individual investors to take control of their portfolios. 

It’s quickly becoming one of the only ways to truly build lasting wealth. 

Ryan Stancil
Editor, Daily Profit Cycle