CWS Market Review – January 12, 2024
“Reversion to the mean is the iron rule of financial markets.” – Jack Bogle
On Wednesday, the stock market closed at its highest level in more than two years. It was the sixth-highest close of all time and less than 0.3% away from a fresh all-time high.
One more push, and we would have gained back everything we lost during the inflation-induced bear market of 2022.
Alas, it was not to be. At least not on Thursday. Yesterday morning’s inflation report was a little hotter than Wall Street expected, and that caused the bears to push the bulls back for a little bit.
Don’t let one day’s move rattle you. The battle against inflation is still going well. In fact, in Thursday’s report, the year-over-year core-inflation rate dipped below 4% for the first time in 28 months.
The lesson for investors is understanding just how dangerous inflation is. Just the merest hint of inflation can scare off the bulls.
Folks who were investing during the 1970s certainly know what I mean. Inflation is a silent tax on capital, and it’s a cruel one as well. Americans who have saved their money for decades watch helplessly as inflation corrodes their life savings away.
In this week’s issue, we’ll look at the CPI report and see if it will impact the Fed’s plans for cutting interest rates. (Spoiler Alert: It probably won’t.) We also have Q4 earnings season about to kick off. In next week’s issue, I’ll unveil our Earnings Calendar for this period. Later on, I have some Buy List updates for you. But first, let’s look at how inflation did last year.