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Some Good Inflation News Coming Soon, Cresset Capital

Some much-needed relief from surging inflation may be at hand.

If true it couldn’t be more welcome as consumers wince from surging fuel and food prices. The recent inflation rate hit a four decade high of 9.1% in June, according to government data.

But that eye watering rate will likely soften in July, according to a recent report from Chicago-based Cresset Capital.

“We see increasing evidence, however, that CPI peaked in June, and July could offer incremental relief,” the report states. “Food and energy prices, which had an outsized influence in recent price data, are coming off the boil, according to current commodity markets.”

Indeed, wheat prices have dropped lately to less than $8 a bushel from a high of near $13 a few weeks ago. Likewise, the cost of Brent crude oil has moderated. It recently fetched $106 a barrel down from around $124 in early March.

Prices for gasoline, lean hogs, heating oil, corn, and soybeans have also seen significant drops lately.

Natural gas prices, which are inextricably linked to electricity prices, are screaming higher, however.

“It’s comforting to see that, with the exception of natural gas, many food and energy prices abated in July,” the report continues.

Lower inflation will of course be good for consumers, but Wall Street will warm to it as well.

This likely drop in inflation could be a positive for investors if the Federal Reserve believes that a fall or moderation in the price level is likely to stick. If that happens then the central bank’s policy makers will be far more likely to halt or pause the war in inflation which is currently being waged by increases in the cost of borrowing money.

If the Fed does pause or even cut interest rates then it’s likely that stocks will rally. They may even rally if the Fed doesn’t cut rates but investors believe that the hiking cycle is close to an end.

That’s why Cresset, and other Wall Street firms, will be closely watching the July consumer price index data in a few weeks.

“The real show takes place August 10 at 8:30 ET, when the Bureau of Labor Statistics releases July CPI,” the Cresset report states. “We, and the market, are betting on a weaker number.”