Wall Street’s main indexes surged significantly on Tuesday following the release of lower-than-anticipated inflation figures, which increased the belief that the Federal Reserve had concluded its interest rate hikes. The annual rate of inflation measured by the Consumer Price Index (CPI), which monitors the expenses of a variety of goods and services – slowed to 3.2% last month, dropping from September’s 3.7% and marking the most subdued rate since July.
Additionally promising, Wall Street’s prices held steady over the month following a 0.4% increase in September. Core prices, which exclude the unpredictable food and energy sectors, rose by 4%, slightly slower compared to the rate observed in September. The report signifies a significant achievement for the Fed in its battle against inflation but in the upcoming weeks, policymakers will monitor the service category closely, seeking further deceleration as their interest rate increases impact demand.
Earlier this month, the Federal Reserve maintained its benchmark interest rate at the highest level in 22 years. Following this Tuesday’s report, prominent analysts and economists indicated only a 1 percent probability that the central bank would increase rates during its upcoming policy meeting in December. Gregory Daco, chief economist at EY Parthenon, said:
“Across the board, it’s a good report and I think this will comfort the excessively data-dependent Fed policymakers that policy is sufficiently restrictive to bring inflation down to 2 percent.”
See Related: Gala is announcing a partnership with Stick Figure Productions to distribute Four Down on the Blockchain
However, analysts from JPMorgan warned that the risk-reward ratio for many stocks remains unattractive currently and restrictive monetary policy is likely to remain in place for some time. JPMorgan analysts anticipate that most adverse effects resulting from increased interest rates haven’t manifested thus far. They highlight an upward trend in consumer loan delinquencies and corporate bankruptcies, suggesting that these patterns are probable to persist unless interest rates are lowered.
This is likely to drive demand destruction, and weakening pricing power and margins for corporates in the coming quarters, and because of this JPMorgan analysts are adopting a defensive stance, maintaining underweight allocations in equities and cryptocurrencies. Nevertheless, they propose an increase in the investment allocation towards gold due to its potential to rise in value during economic downturns, offering a hedge against potential losses in alternative investments.
Gold is commonly regarded as a safe-haven asset, particularly amid economic uncertainty or geopolitical instability. Investors typically turn to gold as a means of preserving value when other assets are considered risky.
