Wall Street got the latest inflation numbers Friday… and they came in right on target.
The Fed’s preferred gauge - the core Personal Consumption Expenditures (PCE) index - rose 0.2% in August, putting annual inflation at 2.9%. Headline inflation came in at 2.7%. Both matched expectations, which means no surprises for Fed Chairman Jerome Powell & Co.
The bigger story? The American consumer remains a powerhouse. Personal income rose 0.4% last month, while spending jumped 0.6% - both slightly hotter than forecasts. That strength has carried through the entire summer. As one economist put it, consumers “literally hit it out of the park” with three straight months of robust spending.
Source: BEA.gov
This resilience has also blunted the feared impact of tariffs. Despite new levies from Washington, companies have absorbed much of the cost, keeping price pressures contained. Goods prices edged up just 0.1%, while services gained 0.3%.
For the Fed, this puts them in an interesting spot. Inflation is still above their 2% target - but not running away. The strong consumer could argue against too many cuts. Still, markets are pricing in an 88% chance of another quarter-point reduction at the October meeting. Odds of a second move in December sit closer to 64%.
Stocks initially welcomed the data, with the market indices ticking higher and Treasury yields easing. In short: the Goldilocks scenario continues - steady inflation, strong consumer, and a Fed still ready to ease. That’s a bullish backdrop for long-term investors like us.
BUT… You must be in the market and the right stocks.
To learn about the best megatrends to invest in today and into the future, catch my live webinar from earlier this week.
To your future success,
Matt McCall
Editor, Market Insights
