Inflation Higher and Stocks Rip

This morning, the February Consumer Price Index (CPI) reported an increase of +0.40%, a “hot” reading, compared to Wall Street’s +0.30% expectation.  We believe that the higher than expected reading is driven largely by seasonality–resetting of new pricing on goods and services usually occurs in January.  Once we get past this first quarter, we expect inflation to continue its downward trend.  In his remarks last week, Federal Reserve Chairman Powell reiterated his commitment to cutting the Fed’s short-term interest rate this year.  Lowering the cost of borrowing for individuals and corporations should add a tailwind to the economy and, in turn, the stock market.  The rally at the beginning of the year still has some gas in the tank, and in fact, we are seeing the rally broaden into sectors outside of Artificial Intelligence (AI) and technology companies.