Fed's Inflation Goals in Sight: PCE Inflation and Market Outlook | Episode 094 | 01-26-24

In today's segment, Megan Horneman, Chief Investment Officer, discusses the latest PCE inflation data. Megan breaks down the numbers, discussing the month-over-month growth of 0.2% and the year-over-year figure of 2.9%, just below the Fed's 3% target. She highlights the positive trend toward the Fed's inflation goal but suggests there could be potential volatility ahead, citing factors like developments in the Red Sea and robust economic growth. The market's response has been positive, with equity markets reflecting optimism. Next week's economic highlights include the FOMC meeting, January jobs report, ISM data, and key earnings reports. For questions or comments, reach out to us at podcast at Verdence dot com. Thank you, and go Ravens!

Watch today's episode here: 

Hello, this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors, coming to you today with our regular segment of Markets. With Megan, happy Friday and Happy Purple Friday to all of our Baltimore fans. Today we're going to talk about the PCE inflation data that we got today. Pce, at the core level, is the Fed's preferred inflation indicator, and what we saw was that inflation grew 0.2% on a month-over-month basis. It was just a little bit higher than last month, but on a year-over-year basis, the actual level came in at 2.9% versus an expectation of 3% and down from 3.2%. So this is important because we're now within that 2% level that the Fed's looking for. We're not at 2%. We still have some ways, a little ways to go, but we are trending in that direction and we've been talking about this slow and steady reduction in inflation. This is definitely good and this is what the Fed's looking for. We are concerned about volatility. You may see in the coming months, though, with inflation data, considering what's going on in the Red Sea, with shipping costs, as well as just the better economic growth that we had in the fourth quarter and the strong consumer spending, this is something that could reignite inflation and that's, in the Fed's going to be paying close attention to. So the market likes this. We are seeing equity markets higher on this data.

Next week is a big week for economic data. Not only do we have an FOMC meeting, we'll have the jobs report for January, we also will have ISM as well, and then we have a bunch of earnings as well for fourth quarter. We have the tech companies, some of the Magnificent Seven that will be reporting. So it's a big week from an economic data and company level. Lastly, the one thing we'll be watching closely is next Wednesday what the Treasury says with their quarterly refunding announcement. That has sparked volatility specifically in the fixed income market in the past. So we'll be back with lots more next week. Go Ravens, big win this Sunday. So we'll have some good news here on Monday. And if you have any questions or comments, please feel free to reach out to podcast at Verdence dot com. Thank you.