Uh-Oh! 2 Critical Inflation Measures Are Heading the Wrong Way in November, and the Stock Market May Pay the Price.
Key PointsAlthough the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have been practically unstoppable for years, persistently elevated inflation can no longer be ignored.
The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have reached record highs, bolstered by AI infrastructure development, strong corporate earnings, and record share buybacks. However, persistently high inflation poses a significant threat to the stock market. The Federal Reserve's preferred inflation measure, the PCE Price Index, has climbed from 3.4% in August to 3.6% in September, with projections of 3.77% in October and 3.82% in November.
Fed Chair Kevin Warsh has warned that the central bank may need to implement more aggressive rate hikes to combat this inflation. Core PCE, excluding food and energy costs, is expected to rise from 3.1% in September to 3.2% in October and 3.31% in November, signaling worsening "Trumpflation" due to President Trump's tariffs and the Iran war.
These factors could lead to higher consumer prices, impacting businesses and consumers, and potentially causing a slowdown in AI growth and a decline in the stock market.
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