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Stocks Tread Water as Inflation Comes in Warmer Than Expected…

Dumaine Investments Weekly Market Update – September 13, 2023

• After beginning September with a renewed pullback on concerns about rising yields and oil prices, US stocks have traded flat over the past week. With earnings season finished and little of consequence in terms of major news items, Wednesday’s inflation report took center stage. Headline inflation came in slightly above consensus due largely to the significant recent increase in energy prices. Core inflation was in-line with forecasts though there was a slight rise in month-over-month numbers, and the annual rate of 4.3% remains elevated relative to the Fed’s target.

• Digging a bit deeper into CPI, there are some troubling signs of advancing inflation. The so-called “super-core” CPI, which measures core services extracting housing costs, rose 0.4% in August after a 0.2% increase in July and a flat June. “This confirms a reacceleration,” says Kevin Gordon, senior investment strategist at the Schwab Center for Financial Research. Still, stocks popped back Wednesday from their initial weak response to the report, perhaps because the data didn’t indicate any sign of inflation running away and most of the rise was energy-related, as expected.

• US-China tensions are spurring a reorganization of global trade as the US seeks to reduce supply-chain reliance on geopolitical rivals and source imports closer to home. Mexico looks better placed than most countries to seize the business opportunities being created by this new Cold War. It has just overtaken China as the largest supplier of goods to the US and boasts the world’s strongest currency this year, in addition to one of the best performing stock markets. Foreign direct investment is already up more than 40% in 2023. We believe Mexico will be a key market to watch as the world realigns.

DISCLAIMER: The information provided in this blog post is for informational purposes only and should not be construed as financial advice. Investment decisions should be based on individual financial goals, risk tolerance, and consultation with a qualified financial professional.