One Fed member thinks inflation could drop at its fastest rate in 100 years. I'll reveal the 11 stocks to buy right now if that happens and exactly how to invest. 🏠 Earn rental dividend income from the real estate site I use, Arrived Homes. Check out these returns! https://mystockmarketbasics.com/ArrivedHomes
The increase in the Consumer Price Index (CPI) surged from 1.4% a year January 2021 to almost 9% by May 2022. It was the fastest increase in inflation ever recorded and in response to the $5 trillion-plus in money printing during the pandemic. With the Fed stomping on the brakes with its fastest rate hikes in 40 years last year, it managed to bring inflation down to 3.7% a year as of September. That pace is expected to slow further to 3.3% when we see October CPI numbers on Tuesday.
It’s important because inflation is the Fed’s main bogeyman, the only thing that could stop the central bank from pausing its rate hikes and eventually cutting rates to support the economy. The members of the Fed have a target rate of 2% they would like to see and expect inflation to get there sometime in 2025. If inflation continues to slow, the Fed can ease off the brake and even lightly tap the accelerator if the economy’s engine starts to sputter.
In fact, one member of the Fed thinks inflation could continue to drop and fall faster than it has at any point in the last 100 years. Right now, that record is held by 1982 when the pace of inflation fell nearly 5% from 8.3% in January to 3.7% year-over-year to begin 1983. Back then it was Fed Chair Volcker’s whatever-it-takes moment, boosting interest rates past 20% to kill inflation of the 70s even if it meant a painful recession in 1981 through ‘82.
Speaking to CNBC last week, Chicago Fed President Goolsbee which to me sounds like a fictional name from a Charles Dickens novel…Goolsbee, said “The fastest drop in the inflation rate in any year was 1982. We’ll see what happens over the next couple of months. We might equal the fastest dropping inflation in the last century. We’re making progress.” On this view of lower inflation and interest rates next year, I’m watching three themes and 11 stocks.
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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through dividend stocks, investing and ways to make more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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