While the weather outside is warming up, inflation continues to cool! April’s Consumer Price Index (CPI) showed that inflation continues to fall as the year-over-year number came in less than expectations, falling below five percent. However, more importantly, this is the first time that the year-over-year number is lower than the Fed Funds rate. This is important to investors as it may signal an end to future Fed rate hikes.

Even though inflation remains above the Fed’s target, they can see the impact of their policy on both inflation and slowing the economy. Remember, inflation coming down is like turning on your air conditioner to lower the temperature in your house from 78 to 68. It doesn’t happen at once, it happens incrementally. The trend in inflation is that it is trending down, which should be a positive for this market and will hopefully give retail investors confidence to enter this market.

So far this year, many retail investors have remained on the sidelines waiting on the end of the Fed tightening cycle. They have also been awaiting the recession that most analysts predicted would happen in the first half of this year. Well, the recession has not come to fruition, and it appears the Fed is closer to being done than continuing to raise rates. These should be seen as positives for the market. As the Lonely Bull always says, “Stay steady my friends.”

Scott Wohlers, President

For the Lonely Bull