The
latest
inflation
data
grabbed
the
attention
of
investors
last
week.
Core
consumer
prices
(which
exclude
volatile
food
and
energy)
rose
3.5%
over
the
previous
twelve
months
compared
to
3.2%
last
month
and
expectations
of
3.4%
(Source:
MarketWatch).
The
threat
of
more
persistent
inflation
challenges
the
previous
narrative
of
lower
inflation
leading
to
lower
interest
rates.
The
concern
this
raised
for
investors
likely
contributed
to
the
Morningstar
US
Market
index
falling
1.63%
over
the
week.
The
change
in
investor
expectations
can
be
most
clearly
seen
in
the
fact
that
investors
believe
that
the
probability
of
at
least
three
interest
rates
cuts
this
year
has
fallen
to
28%
down
from
68%
a
month
ago.
A
more
pessimistic
view
of
inflation
can
also
be
seen
in
the
bond
market
with
the
10
year
US
treasury
bond
now
yielding
4.52%.
While
lower
than
its
peak
in
the
4th
quarter
of
2023,
it
is
significantly
higher
than
the
year-end
yield
of
3.87%.
Big
US
Banks
Causing
a
Stir
Financial
companies
were
in
the
spotlight
as
they
reported
their
latest
results.
The
reaction
to
JPMorgan
Chase
was
notable.
Against
a
background
of
weakening
sentiment,
investors
appeared
to
ignore
the
strength
of
the
business
over
the
first
quarter
and
expressed
their
displeasure
with
JPMorgan
Chase’s
neutral
outlook.
Despite
the
stock
price
falling
6.47%
on
Friday,
Morningstar
banking
analyst
Suryansh
Sharma
continues
to
believe
that
the
US’s
largest
bank
remains
overvalued.
You
can
read
his
take
on
the
results
and
the
outlook
here.
Other
notable
banks
sharing
their
quarterly
financial
scorecard
last
week
were
Citigroup
and
Wells
Fargo.
Neither
suffered
the
declines
that
JPMorgan
experienced,
reminding
us
that
disappointment
is
often
most
keenly
felt
where
expectations
are
highest
and
consequently,
periods
of
negative
sentiment
create
opportunities
for
long-term
investors
to
buy
high
quality
businesses
at
attractive
prices.
Sticky
Inflation,
Falling
Prices?
While
there
are
few
significant
economic
releases
this
week,
market
commentators
are
likely
to
seek
confirmation
of
the
new
narrative
that
inflation
is
‘stickier’
than
previously
thought
and
therefore
interest
rates
will
be
higher
for
longer.
It
is
a
short
logical
leap
from
there
to
the
belief
that
the
economy
is
likely
to
slow
and
profits
will
be
harder
to
come
by.
While
the
perspicuity
of
this
view
will
ultimately
be
revealed
by
data,
the
narrative
may
be
sufficiently
beguiling
to
lead
to
further
price
falls.
For
those
hoping
to
make
good
decisions
in
these
situations,
it
is
essential
to
have
a
robust
estimate
of
the
‘fair
value’
of
investments
in
which
you
are
interested.
In
the
absence
of
the
research
required
to
provide
this
important
anchor
to
your
decision
making,
continuing
to
invest
and
focusing
on
the
benefits
of
participation
in
the
long-term
growth
of
equities
is
a
better
plan.
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