Market Analysis: The Latest on Inflation and Interest Rates

PCE Numbers: A Closer Look

The Personal Consumption Expenditures (PCE) price index for August has been released, giving us a fresh perspective on inflation. This report is crucial because it is the Federal Reserve’s preferred inflation indicator. Specifically, Fed Chair Jerome Powell has emphasized the importance of core PCE, which excludes food and energy, aiming for a 2% annual increase.

• Headline PCE rose 0.1% in August and 2.2% over the past 12 months, the lowest annual increase since February 2021.
• Core PCE, which excludes food and energy, increased by 0.1% in August and was up 2.7% in the past 12 months.
  

  Too Little, Too Late?
  

  The Federal Reserve made a key interest rate cut of 0.5% in September, marking its first rate cut since March 2020. With the recent economic data showing signs of weakness, the question arises whether the Fed acted in time or if another rate cut is needed at the upcoming meeting in November.

• The unemployment rate has risen to 4.2%, and consumer confidence has declined significantly.
• Speculations are growing about the possibility of another "jumbo" 0.5% rate cut if the economic data worsens.
  

  Finishing the Year Strong
  

  Despite economic uncertainties, the stock market has performed remarkably well this year. Institutional buying pressure has remained strong, particularly in fundamentally superior stocks. The S&P 500, Dow, and NASDAQ have all seen significant gains, with Growth Investor’s Buy List surging more than 28% year-to-date.

• Growth Investor stocks are characterized by strong sales and earnings growth, with an average earnings surprise of 27.8% last quarter.
• The upcoming third-quarter earnings season presents opportunities for further growth, with new stock picks added to the Buy List for subscribers.

  In conclusion, the latest inflation and interest rate data provide valuable insights for investors. By understanding these trends and staying informed about market developments, individuals can make informed decisions to secure their financial future and capitalize on market opportunities.