A benign inflation report and positive news out of North Korea provided a boost for global stock markets. For the week, the S&P 500 soared 2.4%. Global stocks rose, as the MSCI ACWI climbed 2.1%. The Bloomberg BarCap Aggregate Bond Index was unchanged for the third straight week.
Key points for the week
- Inflation data came in slightly below expectations.
- Excluding the energy sector, price increases were moderate.
- Inflation remains a concern as the economy continues to grow.
Economic News
April’s inflation numbers came in slightly below expectations, which provided a boost to markets. April’s price index rose 0.2%, slightly less than the 0.3% expected. Over the last year, inflation rose 2.5%. A rapid increase in gasoline prices in April contributed to the strong number. The continued increase in oil prices will likely boost inflation again in May.
Core inflation, which excludes energy and food prices, rose 0.1% last month and has increased 2.1% over the last year. Energy and food prices often rise and fall more than other sectors.
The stock market reacted positively to the lower-than-expected numbers. Many investors, including those on our investment team at Carson, remain concerned the long economic recovery and low unemployment rate will eventually lead to higher inflation.
While welcoming the news from the last report, we continue to believe inflation will become a greater threat. Our expectations are for wage growth to strengthen and for those costs to be passed on to consumers in the form of higher prices.
Fun story of the week
Teachers pull out all the stops to gain credibility
Teaching has always been a challenge, but gaining credibility in the smart phone era has become even tougher. An Australian teacher found her efforts to recreate McDonald’s Chicken McNuggets at home had the added benefit of raising her “cred” with students. It didn’t hurt the chicken turned out to be quite tasty.
This newsletter was written and produced by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
S&P 500 INDEX
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
MSCI ACWI INDEX
The MSCI ACWI captures large- and mid-cap representation across 23 developed markets (DM) and 23 emerging markets (EM) countries*. With 2,480 constituents, the index covers approximately 85% of the global investable equity opportunity set.
Bloomberg U.S. Aggregate Bond Index
The Bloomberg U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.