In the December update of The Seven Signs of a Changing Economy™ (Read it Here), I wrote under Sign #7 that the Producer Price Index (PPI) had crested and was starting to drop.

The Producer Price Index (PPI) measures inflation at the factory “input” level.  This month’s data continues to support the fact that we have seen the peak of the inflation increases with input costs continuing to drop again this month.  More importantly, let’s look at the trend:

                                2022 PPI

                January                10.10%

                February              10.40%

                March                   11.70%

                April                      11.70% ---------likely peaked

                May                      11.20%

                June                     11.10%

                July                        9.80%

                August                   8.70%

                September            8.40%

                October                 8.00%

                November             7.40%

Total Producer Price input pressures have plummeted – all topping out in April 2022.

Take a look back to 1990 in the chart below and you will see our total Input Costs (key driver of inflation) have dropped to the average level of the last twenty years.

Owners Equivalent Rent (OER), i.e., housing costs took about two years to roll in and it will take about the same amount of time to roll off the inflation gauge.

What is my point?  Soon, perhaps very soon, and much sooner than most believe the Federal Reserve will see their work of increasing interest rates is done.  That will move market valuations to the upside.

Our WSG family will now start to see changes in our asset allocations and investment positions as we make changes to reduce capital gains tax impact, i.e., tax swaps.  In addition, we will, as stated here many times, be investing our cash a little at a time thoughtfully, on purpose and intentionally.

As we look back from 2027 to today, remember Five Year Money (Read it Here), the next few quarters could be where we plant the seeds for potentially great future returns.  We just won’t know it for a few years.

I’m interested in your thoughts, comments, and observations.  Feel welcome to call, email or stop by the office and say Hi.

Respectfully,

James O. Lunney, CFP®

CERTIFIED FINANCIAL PLANNER™ Professional  

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.