Wrapping Up the Year with Megan's Take on Inflation and Interest Rates | Episode 086 | 12-22-2023

Megan unpacks the latest inflation trends in our final episode of the year. She offers her view on the PCE Core deflator's latest figures—a key indicator the Federal Reserve keeps under close watch. With a decrease in the year-over-year rate, she expertly breaks down what this may spell for the Fed's monetary policies and how it contrasts with investors' hopeful outlook on future rate cuts. This analysis is a must-hear for anyone looking to understand the implications of these economic shifts as we say goodbye to this year and cautiously step into the next.

As we end the year with nearly 90 episodes of Markets with Megan, this session is a reflective look back and an eager glance forward. Megan extends her heartfelt thanks to all of you who've joined us. She looks forward to more in-depth discussion to come in 2024, ensuring that our conversation on the ever-evolving market dynamics continues. As the holiday cheer sets in, Megan's invitation stands: reach out, engage, and be part of the dialogue that shapes our understanding of the markets. Happy holidays, and here's to a prosperous New Year from all of us at Verdence Capital Advisors! 

Hello, this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors. We're coming to you today with our regular segment of Markets with Megan, and we're coming remotely, so thank you for listening. We are going to discuss a little bit of the data we got this morning, specifically on the much anticipated inflation data that this is the PCE Core deflator. This is what the Fed pays the most attention to. On the headline level it actually declined on a month-over-month basis On at the core level. This is what the Fed's going to look at. This will strip out food and energy. This rose a little bit less than expected. That brings the year-over-year rate down to 3.2 percent. The expectation was for 3.3, but this is down lower than last month's, revised at 3.4. This is welcome news for the Fed. Inflation is definitely trending in the right direction. This is good news.

The concern that we have is investors are pricing in now the first rate cut in March and then at least 150 basis points of rate cuts in the calendar year of 2024. Again, very optimistic view. We don't take that view. We're a little bit more cautious. That the Fed's going to have to keep I guess you could say, not their foot on the pedal, but they're going to have to rein in this optimism with investors, primarily because inflation is not at that 2 percent level. It's over 3 percent still. We have often warned that to get from this level down to that 2 percent is where it gets trickier.

We will watch the data. We'll be back if there's anything necessary to report. But this is likely our last podcast for the year. We've recorded up close to 90 podcasts. We really want to thank everybody for tuning in and listening. It's been a great experience for us. It's been a lot of fun. We want to wish everybody a happy holidays and a very happy new year. We'll be back in 2024, and we look forward to these regular podcasts. If you have any questions or comments, please feel free to reach out to podcastsatverdencecom. Thank you.