HOW TO READ A CPI DATA REPORT (2023 BEGINNER FRIENDLY) from consumer price index and market basket Watch Video

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Ricky Gutierrez

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Home prices have increased by 47% since early 2020, reaching a median price roughly five times the median household income last year, according to a report by the Harvard Joint Center for Housing Studies. This rise, coupled with high mortgage rates, has made homeownership increasingly unattainable for many, affecting nearly half of metro areas where buyers need over $100,000 to afford a median-priced home. The situation has also worsened racial disparities in homeownership, with only a small percentage of Black and Hispanic renters able to afford median home prices. The rental market has seen rising prices, driven by high demand and a significant housing shortage.
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The latest inflation data is providing a boost to the current stock market rally, with the S&P 500 and Nasdaq hitting four straight record closes last week. Wall Street strategists are raising their year-end price targets for the S&P 500. The May Consumer Price Index and Producer Price Index showed significant progress towards the Fed's inflation goal. Economists believe this indicates a positive reading of the Fed's preferred inflation gauge. The Fed's latest Summary of Economic Projections showed a median forecast of just one rate cut in 2024. Still, strategists believe this may already be stale given the positive inflation data released after the Fed's meeting.
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After years of low interest rates, the Federal Reserve has aggressively raised rates to fight high inflation, causing a painful downturn in the bond market. However, some top bond investors see current bond yields as highly attractive compared to the last 15 years. Corporate bonds currently offer yields of 6% for broader bonds, 7% for preferred stocks, 8% for high-yield bonds, and almost 10% for senior loans. Investors who buy bonds now can benefit from both steady income streams from yields, as well as potential price gains if the Fed cuts rates in the future. Bond prices often rise after the Fed stops raising rates, and total returns have historically been strong in the 5 years following peak rate hiking cycles.
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