So how do people get their thousands of dollars back that they lost to inflation over the past few years?
People have lost 5 months pay over the past 2.5 years, even after pay raises.
That’s not how inflation works, but I’m sure you know that.
The staggering inflation of the late seventies through ‘82 didn’t get erased when Volcker’s rate hikes finally stemmed it.
But a rate reversal did wonders for business spending and consumer sentiment.
Obviously, it’s still too early to declare inflation dead (or even within the Fed’s 2% target area,) but we’re at least seeing some signs that it’s slowing down.
Yesterday UBS strategists published expectations that the benchmark federal funds rate (now 5.5%) will to fall to between 2.5% and 2.75% by the end of 2024, and see a terminal rate of 1.25% by early 2025. If true that’d be massively bullish for the economy.
Today’s 88 point S&P rally shows that at least for today Mr. Market wants to believe.