April CPI Still Hot at 3.4% vs Fed's 2.0% Target

Despite President Biden's "Inflation Reduction Act of 2022" (estimated to contain $500B in new spending and tax credits) and the Federal Reserve keeping its Fed Funds Interest Rate at a 20-year high, inflation at 3.4% is 1.4% or 70% above the desired or "target rate" of 2.0%.

CPI-U: This morning the US Bureau of Labor Statistics announced, "The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in April on a seasonally adjusted basis, after rising 0.4 percent in March". and "Over the last 12 months, the all items index increased 3.4 percent before seasonal adjustment."

Core CPI-U: "The index for all items less food and energy rose 0.3 percent in April, after rising 0.4 percent in each of the 3 preceding months." and "The all items less food and energy index rose 3.6 percent over the last 12 months."

Chart: CPI vs Fed Funds Rate vs Expected 10-Yr Inflation from 2004

Chart: CPI vs Fed Funds Rate vs Expected 10-Yr Inflation from 2020

Table: Raw Inflation Data from October 2023

Chart: Fed Funds Interest Rate vs S&P 500 - 1993 through today

Chart: Fed Funds Interest Rate vs S&P 500 - 2019 through today

Tariffs and Inflation:  Perhaps I should have included President Trump's tariffs as a contributor to inflation stubbornly remaining above the desired 2.0% target.

If so, then President Biden's new tariffs will make inflation worse.

Yesterday President Biden announced new tariffs on goods manufactured in China. 

WASHINGTON, May 14 (Reuters) - President Joe Biden is hiking tariffs on $18 billion in Chinese goods including electric vehicles, batteries, semiconductors, steel, aluminum, critical minerals, solar cells, ship-to-shore cranes, and medical products, while retaining Trump-era tariffs on over $300 billion in goods. 

The United States Trade Representative's Office told Reuters it anticipates the effective date will be in approximately 90 days.

Spending $500B to "reduce inflation" and then implementing new tariffs then listening to others debate the merits...

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2023 Year End Summary & Market Update for 12-31-23

Happy New Year!

Unlike 2022, 2023 was a great year for both stocks and bonds.

The US stock markets responded well to the US economy continuing to grow while inflation continued its slow decline:

• Despite very confident predictions from many famous economists that the US economy would experience a recession by Mid to Late 2023, this prediction was as bad as the prediction that high inflation would be "transitory." 
• Prediction is very difficult, especially if it's about the future!”
  Niels Bohr, Nobel laureate in physics & father of the atomic model
  
  
• CPI-U Inflation fell by over 50% from 6.5% on December 2022 to 3.1% today. (Inflation peaked at 9.1% in June 2022.  Note, inflation numbers are for the prior month.) Here we are a year and a half since inflation was thought to be "transitory" and yet it remains more than 50% above the Fed's 2.0% target.
  
  
• The 10-year US Treasury rate ended the year 0.1% below where it began.  The 1-month US Treasury Rate rose from 4.12% to 5.60% today as the Federal Reserve raised their Fed Funds interest rate by 1.0%. 

My Notes on the Fed Funds Rate

• 12/14/22 the Fed raised the Fed Funds rate by 0.50% to a new range of 4.25% to 4.50%

• 12/13/23 the Fed kept rates at a range of 5.25% to 5.50%

US Treasury Rates

10-Yr & 30-Yr T-Bond Rates vs S&P 500

Major Market Index Charts:

S&P 500

Dow

Nasdaq

Russell 2000 Small Cap Index

Kirk Lindstrom's Investment Letter

To see what stocks and ETFs are in my "Explore Portfolio" and get a full list of on my price targets to both take profits or buy more:

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xx