Last week the equity markets retreated, in general, during the holiday-shortened week. Inflation, the conflict in Ukraine, and the resurgence of Covid-19 all remain issues that are weighing on investors. The S&P 500 index, a proxy for large-cap US stocks, fell 2.4 percent, while the MSCI ACWI index, a proxy for large-cap global stocks, declined 1.7 percent.[1]
Inflation has been front and center of both investors and consumers’ minds in 2022, and the latest Consumer Price Index (CPI) reading of 8.5% year-over-year only adds to the concern (highest reading since the early 80’s). However, it is important to remember that the CPI is composed of several different categories, some of which may be more transitory in nature rather than long-lasting. Below, is a graph from J.P. Morgan summarizing the different component pieces of CPI, along with their opinion on whether the increase being experienced in each will be short-lived (transitory) or longer-lasting (sticky).[2]
[1] Source: YCharts
[2] Source: Source: BLS, J.P. Morgan Asset Management. Contributions mirror the BLS methodology on Table 7 of the CPI report. Values may not sum to headline CPI figures due to rounding and underlying calculations. “Shelter” includes owners’ equivalent rent and rent of primary residence. “Other” primarily reflects household furnishings, apparel and medical care services. Guide to the Markets – U.S. Data are as of April 13, 2022.