Stocks were more stable last week as investors look forward to potential relief from inflation.
Why? It looks like the Federal Reserve’s attempts to cool down inflation with interest rate hikes are working. Check out how that could impact your wallet below.
Inflation numbers are based on how much stuff costs across 4 main categories.
Goods: Like cars, TVs, or clothes. Supply chain issues from COVID-19 have been behind price jumps — but costs are starting to decline.
Energy: How much you pay for gas, oil, and electricity. Energy is usually pretty volatile anyway, but costs have jumped as the war in Ukraine impacts where and how countries get their oil.
Food: Like meat, cereal, or eggs. High energy prices have been the main causes of food cost inflation this year. More expensive fuel means it costs more to ship or even package your food, leading to a jump in food prices.
Services: Think airfare, Netflix, and haircuts. Wage increases for these kinds of services have led to some of the price increases behind inflation rates.
It can take time for changes in the financial markets to make their way to your day-to-day costs, but economists are seeing price drops already.
Oil is down nearly 20% in early July from June highs. This price pullback hasn’t made its way to the gas pump yet, but stay tuned.
Lumber is down 50% from its $1,400+ peak in early March as supply chains improve and the housing market slows.
Wheat, cotton, and corn are down more than 20% after peaking in mid-May.
Good news from the past: Historically, price drops across major commodities like this have been followed by declines in inflation. These trends could be a reason for the recent stock market stability.
Remember, whether markets are up or down on a day-to-day basis, you can benefit just by sticking with it. Consistent investing, no matter what the market is doing, can help you capitalize on volatility over the long term.
Try a $5 boost to your Recurring Investment for a chance at taking advantage of market movements.
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