CPI & PPI reports this week showed a slowdown in prices for goods and services, but not as much as investors anticipated.

This week as been a tough week for markets after CPI & PPI reports showed a rise in expectation for inflationary reports. The markets were undecided (and still are) as to where to go next?

So what's the problem?

CPI, which is also known as the consumer price index, is a measurement of the weighted average of household goods & services. The USAs CPI index figure is closely watched by investors and the Yearly figure came out at 6.4% vs 6.2% consensus in February, the markets were unsure how to take this data, first rallying, then dropping, then rallying again and this was because while inflation expectations were 0.2% above-forecasted figure, they were still lower from the previous month of 6.5% suggesting things are getting better.

PPI also had a similar sticky situation. PPI, also known as the producer price index, is a measurement of the average changes in prices received by domestic producers for their output – Essentially what is the cost difference for producers of goods and services. This February the yearly figure came in at 6% vs the 5.4% forecast, however the month prior this was 6.5%. While this figure was 0.4% above estimates it still showed a drop.

What's next for the markets?

In our opinion, the federal reserve has inflation somewhat under control. Inflation is dropping and will likely continue to drop given the falls in commodities recently (oil, gas and lumber as examples). Interest rates may rise a little more and it seems that markets are pricing this in as we speak however we believe that 2023 will see peak interest rates before either stagnation or a decline in rates as inflation drops. Bonds continue to offer good returns but as rates peak the money flow will likely be reversed back into equities.

The American markets continue to be choppy, with the SP500 stuck between 4,000 and 4,200. It will probably stay within this range for the remainder of the month. Ample support sits below at 4,000 followed by 3,926.