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04.15.2022 by David Robinson

March Inflation Report Grabs the Headlines

Headline CPI Rises 8.5%: The government released the March CPI report this week, and it was a doozy. Prices rose 8.5% in March, compared to a year ago. It was the highest increase in 40 years. CNBC Washington Post Moreover, producer or wholesale prices climbed 11.2% in March, the largest increase in history. CNBC While the Fed has no control over supply, these numbers categorically affirm that the Fed must act aggressively to cool demand. Understanding that there is no putting lipstick on these inflation pigs, some additional context may be helpful.

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  • Core CPI Increases 6.5% Year Over Year in March: The Fed focuses more on Core CPI, which strips out the volatile energy and food prices. The March Core CPI increase came in lower than Headline CPI but still high at 6.5%. The “best” number was the 0.3% increase in Core CPI month over month, the smallest increase since September. Might this be a sign that inflation is peaking? New York Times It probably is, but heavy lifting remains ahead. New York Times
  • Brainard Expresses Confidence That Fed Can Do the Job: Lael Brainard, who is waiting for Senate confirmation as the Fed’s vice chair-person, expressed strong confidence this week that the Fed will move expeditiously to constrain inflation and could do without triggering a recession. Wall Street Journal
  • What Does the Treasury Inflation-Protected Securities (TIPS) Market Signal? Financial markets can for sure get it wrong, but the current market for TIPS assumes 3.31% inflation on 5 Year TIPS and 2.86% inflation on 10 Year TIPS. In other words, the TIPS market is buying that the Fed will break inflation in a reasonable timeframe. Louis Fed
  • Biden Allows More Ethanol in Gas: With rising energy prices a big component of CPI, President Biden has authorized more ethanol in gas to keep the price at the pumps down. Wall Street Journal US Department of Energy
  • Higher-Income Consumers Are Cutting Back: Inflation inflicts the most pain on lower-income consumers, but even those with greater resources are becoming more cautious in their discretionary spending. CNBC

U.S. Economy Going Strong: We hear from some that the economy is doing poorly. While inflation is undoubtedly a genuine problem, the economy continues to do well. Indeed, economists expect the U.S. economy to grow 3.3% in 2022, net of inflation. Axios

Solid Earnings Growth: Consistent with the continued strong economic growth, S&P 500 Index earnings are forecasted to grow 4.0% year over year in the first quarter. FactSet

Globalization Is Over: Conventional wisdom had it that global trade would bring us closer together and minimize the chances of military conflict. In retrospect that may have been startling naive. David Brooks, one of our most thoughtful thinkers in my view, offers his insights into globalization, including global cultural wars. I highly recommend it. New York Times

Elon Musk Takes on Twitter: Elon Musk has accumulated a 9% position in Twitter but will not be joining its board. To the extent that Musk uses his power to pressure Twitter to reopen its platform to all, it will have major repercussions for all social media platforms and their right and/or duty to regulate their own content. Vox

Amazon’s First Union? Amazon, the second largest U.S. employer, may be getting its first unionized workforce in a Brooklyn, NY workplace. This could have massive labor and employment implications, as Amazon was previously thought to be union-proof. The organizing was done on a grass roots level without the involvement and financial support of “big labor.” NPR

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Short Takes:

  • Why Do the Japanese Outlive Us in America? Life expectancy in Japan is around 6 years longer than in the U.S. But can that be? They rarely go to health clubs or purchase expensive exercise equipment. Walking is the most popular exercise among the young. The increased longevity is probably due to diet. They eat more fish but far less meat and dairy. But there may be other factors. Medium
  • Active Grandparent Hypothesis: Might it be possible that evolution has hard-wired grandparents to maximize their health to help raise grandchildren? Are grandparents, who are more engaged with their grandchildren, more health conscious? New York Times
  • Blueberry Power! A Harvard nutritionist says that blueberries are her #1 brain food. CNBC And we know that they can also improve artery function. org
  • The Most Beautiful Places in Every State: Talk about highly subjective, but still. This would make for a terrific travel bucket list. See how many you can guess. Conde Nast Traveler

RSWA Webinar Series - Understanding Cryptocurrencies: You should be receiving email invites to our next quarterly webinar on Thursday, April 21st at 4:00pm. We do not recommend investing in cryptocurrency for our clients due to its volatile nature. But we do want you to be informed. Axios sends out an interesting crypto e-newsletter that I have found interesting. Axios

A Quote to Consider: “You can observe a lot by just watching.” Yogi Berra

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As always, thank you for reading. Stay safe and be well. We look forward to hearing from you and connecting.

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