Melting Up!

The rising stock market is enlisting more and more firms in its upward march. It may have started with a few mega-cap tech names but now includes companies from every sector. The advance is now quite broad. This obviously says something about the economic backdrop. It is strong and getting stronger. Earnings across the board have been excellent and are still growing. People are working, unemployment is low, and wages are rising. The one fly in the ointment is inflation.

Inflation has come down from over nine percent to about three percent since the Federal Reserve began tightening monetary conditions – raising interest rates. However, as the Bull predicted, inflation is getting sticky around its current level. There are many reasons for this, and these are not likely to relent anytime soon. To the Fed’s credit, they do not seem to want to sacrifice our good economy for forcing inflation lower quickly. They have signaled they are willing to be patient and hopefully see the inflation rate gradually decline toward their two percent target.

Remember, a three percent inflation rate has been more the norm in our modern economy than two percent. This rate is manageable and helps keep the economy moving forward. It encourages efficiency, productivity, and many other measures for companies to keep up and grow their profitability. Thankfully, artificial intelligence offers the promise of helping do exactly this. There is a lot to be optimistic about; stay steady my friends.

The Lonely Bull