Stocks slipped a little lower this week before showing signs of stabilization on Friday morning. The war in Iran and subsequent attacks on civilian shipping in the Persian Gulf continued to weigh on markets this week, sending oil prices over $100 per barrel briefly, then settling in the mid-$90s on Friday. Higher oil prices are stoking fears of higher consumer prices and inflation in the coming months.
As such, the threat of rising inflation will make the Fed’s job much more difficult. While inflation has been declining toward the Fed’s 2% target, recent developments are making interest rate cuts less likely this year. Interest rate cuts are stimulative, and accelerating economic growth means an increasing demand for energy. And if energy supplies are lower in the face of more demand, energy prices will remain higher and ripple through the economy.
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
