Weekly Reading Recommendations
How a Key Rent Metric Can Change the Path of Inflation (Bloomberg)
GDP: The Good and Bad Inside the Worse-Than-Expected Report on Economic Growth (AXIOS)
Florida's Home Insurance Industry Weaknesses (Bloomberg)
Reasons to Be Confident About the Future
A daily diet of negative news can lead even the most experienced investors to lose conviction in their long-term investment plans. Bad news often overshadows more favorable news. Simply put, bad news sells because of the attention grabbing headlines media outlets can produce around them.
Nevertheless, with wars in Ukraine and the Mideast, simmering U.S.-China tensions and a contentious U.S. presidential campaign underway, it is understandable that investors may be anxious. Yet positive trends - unlikely to be covered by the media - across technology, health care and other areas are transforming lives and driving opportunity for companies and patient investors. This week's highlight article from Capital Group provides five reasons to feel confident about the future.
Click Here to Read: What's Right with the World
But the list of reasons why the world is improving is far beyond just five. For further optimism, the following article from Ben Carlson highlights 50 amazing facts that prove the world is much, much better than most suspect.
50 Amazing Facts on How the World is Getting Better (Ben Carlson)
The bottom line as it pertains to investing: Tune out the noise and stay focused on what matters. Distractions and discouraging news are always around us. There are the challenges we are aware of and unknown setbacks that will inevitably occur throughout the year. Bad news can drive market volatility in the near term, but company fundamentals drive long-term value. Investors who remain focused on their financial objectives will be better positioned to participate in long-term investment opportunities when they arise.
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Charts that matter
The Disconnect Between Real Time Measures of Rent & the Government Measures
Expanding upon the article above titled, "How a Key Rent Metric Can Change the Path of Inflation," this week's chart provides a look at the differences in real time market indexes of rental prices (Blue & Green Lines) relative to the government's measure of rent prices used in Consumer Price Inflation (CPI) data.
The measure of the rents in CPI tends to lag well-known indices of market rents like the Zillow Observed Rent Index. CPI rent inflation rose only moderately in 2021-2022, while market rents were soaring. Now, the opposite is occurring, as market rents have declined substantially since the peak in 2022 while CPI rents started its downward ascent in mid-2023 and remains much higher than market rent indexes. With rental inflation accounting for over a 1/3rd of the weighting in the CPI basket, continued declines as it catches up with real time measures will help with the long-term trend of inflation. Nevertheless, the final path to the Fed's 2% target will be a bumpy one.
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