CPI, consumer sentiment, inflation: Market impact
November's Consumer Price Index (CPI) showed inflation trending higher, rising by 0.1% month-over-month. The inflation print largely came in line with economist projections after rising by 3.1% year-over-year. The University of Michigan consumer sentiment survey showed a sharp monthly improvement, climbing 13.2% from November.
So what does this all mean for the market and what can investors expect heading into 2024? Yahoo Finance spoke to experts across the industry to break down CPI, consumer sentiment, and inflation data from the year, as well as the market impact for the upcoming year.
Consumer sentiment (00:00:03)
Yahoo Finance's Madison Mills discussed the University of Michigan consumer sentiment survey, specifically as it related to inflation expectations. Mills said, "These inflation expectations, a huge headline here. One year views of inflation expectations dropping to 3.1% from 4.5%."
Interactive Brokers Chief Strategist Steve Sosnick also broke down the consumer sentiment data as it related to inflation. Sosnick explained, "These numbers do not signal recession. If you've got a buoyant consumer, if they have jobs, if the vast majority of people who want a job can get one ... these are all positive numbers."
CPI (00:00:34)
Historically, the CPI report has played a significant role in the markets, as well as the rally so far this year. Yahoo Finance's Jared Blikre analyzed how stocks react to CPI data. Blikre said, "It accounts for about 5 percentage points of the gain, just those CPI days. So had you been in the market only on CPI days you would be up 5% this year, so that's pretty significant."
Bank of America Securities U.S. Economist Stephen Juneau broke down November's CPI report and his expectations for the upcoming year. Juneau said, "I'm encouraged by the details. You still have this story of sticky services inflation ... we think it just gets a little more stubborn as we move forward. Why? Mainly because of services."
eToro U.S. Investment Analyst Callie Cox discussed the CPI report as it related to inflation and her expectations for the U.S. economy in 2024. Cox said, "The economy is still resilient and inflation is still coming down at an impressive rate. So if you're an investor looking ahead to 2024 ... look at quality risk, look at those companies that can survive a recession. But don't sit this market out, it's a bull market until proven otherwise."
Video highlights:
00:00:03 - Yahoo Finance's Madison Mills
00:00:16 - Interactive Brokers Chief Strategist Steve Sosnick
00:00:34 - Yahoo Finance's Jared Blikre
00:00:52 - Bank of America Securities U.S. Economist Stephen Juneau
00:01:21 - eToro U.S. Investment Analyst Callie Cox
Video Transcript
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MADISON MILLS: These inflation expectations, a huge headline here. One year views of inflation expectations dropping to 3.1% from 4.5%. Obviously, a hugely bullish indicator for the markets.
STEVE SOSNICK: The one thing I will say about the consumer sentiment numbers regarding inflation, as of now these numbers are not signal recession. If you've got a buoyant consumer, if they have jobs, if the vast majority of people who want a job can get one or have one, we saw continuing claims fall. These are all positive numbers.
JARED BLIKRE: CPI has played a very important part in the rally this year. In fact, in the S&P 500 and the spy that tracks it, it accounts for about five percentage points of the gain, just those CPI days. So had you been in the market only on CPI days, you would be up 5% this year. So that's pretty significant.
STEPHEN JUNEAU: I'm encouraged by the details. You still have the story of sticky services inflation. We're of the view that you're going to get into this stall speed next year around 3%, a little bit below 3%. So it's going to be a little bit harder. We've seen very quick disinflation over the course of this year.
I believe if you look at core PCE inflation, the Fed's preferred measure, that's running at 2.5% annualized over the last six months. In March it was at 5.7%. That's very fast disinflation. We think it just gets a little bit more stubborn as we move forward. Why? Mainly because of services.
CALLIE COX: We're still seeing inflation come down. We're still seeing a decent but weakening job market. Those trends haven't changed. The economy is still resilient, and inflation is still coming down at an impressive rate. So if you're an investor looking into 2024, I'd first of all pat yourself on the back, because we've made it this far, and a soft landing is still in play.
Prepare or stay nimble because a recession is still on the table. Look at quality risk, look at those companies that can survive a recession. But don't sit this market out. It's a bull market until proven otherwise.
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