US Inflation, Fed Minutes, Consumer Sentiment | 3 Things You Need to Know This Week

Transcript

Mathew White:

Hello, and welcome to 3 Things You Need to Know This Week,our regular series designed to help you sift through the noise across financial media and understand what really matters for markets. To stay up-to-date with our latest market insights, subscribe to our YouTube channel or visit fisherinvestments.com. And with that, here are three things you need to know this week.

First, March U.S. inflation data.

On Friday, we'll get a look at the March inflation numbers. The year over year consumer price index, or CPI, was 2.4% in February. That matched inflation data we saw in January. After spiking in 2022, CPI has hovered around 3% year-over-year since early 2024. That sits right in line with the long term average dating back to 1926. Some investors may wonder that the ongoing conflict in the Middle East could reignite inflation. Global oil prices have seen big daily volatility since the conflict started. Brent crude has briefly traded as high as $120 per barrel, but has also experienced rapid price drops in recent weeks. While some might fear high oil prices can cause inflation or lead to a recession, history is mixed. High oil prices have sometimes coincided with high inflation and recessions, but not always. Importantly, context matters, as other factors were often at play beyond just high oil prices. Inflation is fundamentally a monetary phenomenon. It happens when too much money chases too few goods and services. While the conflict in the Middle East is pushing up energy costs, it doesn't increase the money supply. That's primarily influenced by central bank actions. Right now, global money supply growth looks tame. While inflation rises or falls, you shouldn't overstate the importance of March's headline inflation number. The prudent action is to stay focused on your long term investment objectives.

Next, the Fed's meeting minutes.

On Wednesday, the US Federal Reserve will release minutes from its March policy meeting. Many investors look closely at these meeting notes for potential clues about what Fed officials might do next. Regardless of what the Fed meeting minutes say, it's impossible to know how Fed officials will interpret data leading up to their next meeting. We think attempting to predict what the fed will do next is futile, considering they often say one thing and do another. Additionally, keep in mind that the Fed meeting minutes are not full transcripts. They're edited and redacted, only showing what the Fed approves for public release. So, while some might treat them as a "peek behind the curtain", they're far from the full story and may lack critical context. As we've noted before, monetary policy is just one factor influencing markets. Its impact isn't predetermined, whether positive or negative. That's why we believe long term investors don't need to focus on interpreting curated meeting minutes or on trying to predict the Fed's next move.

Finally, new consumer confidence data.

This Friday, the University of Michigan will release its preliminary consumer confidence for April. March's reading was later revised down to 53.3, which is a historically low reading. Investors often fixate on the report, and unfortunately, headlines frequently mistake a single data point as a permanent trend. The recent drop likely stems from the spike in energy costs following the conflict in the Middle East. Naturally, chatter surrounding impending recession has increased. Consumer sentiment surveys generate headlines. However, you need to understand that they do not reliably predict the future of the economy. These metrics reflect current investor emotions. They don't tell us how consumers or businesses might behave going forward. Consumer sentiment often aligns with existing trends like stock market performance, economic data, and the tone of financial news. Take last spring as an example. Sentiment dipped sharply during the stock market correction tied to tariff concerns. That falling sentiment wasn't predictive. By May and June, sentiment rebounded as markets and conditions stabilized. We can actually view weaker sentiment as a positive factor because it helps set lower expectations. As long as economic reality turns out even slightly better than people expect, that positive surprise can help propel stocks and support the continuation of the bull market.

And that's it for this episode of 3 Things You Need to Know This Week.

For more of our thoughts on markets, check out This Week in Review, released every Friday. You can also visit FisherInvestments.com. Thanks for tuning in, and don't forget to hit "Like" and "Subscribe."