Inflation's Persistence

On Thursday, U.S. stock indexes rebounded from losses recorded early in the session to conclude considerably higher than earlier in the day. This unprecedented comeback from levels recorded during the months of the epidemic in 2020 was spearheaded by the energy and bank equity markets. The final tally for the three most important stock indices was positive. The market's declines on Friday came after a significant recovery on Thursday when equities began the day in the red after the publication of an inflation figure higher than anticipated.

But that did not last long, as equities quickly recovered from their earlier losses and turned green before the middle of the trading day. As a result, the market was able to break its losing run of six days and finish with a significant gain. The equity markets also dropped drastically on Friday after a consumer poll by the University of Michigan revealed that respondents' estimates of future inflation increased to their highest level in the last six months. The high rate of inflation is harming consumer morale as well as their ability to make purchases, and it is causing many families to utilise their savings as well as credit to fund expenditures.

As a result of Friday's drop, the Standard & Poor's 500 Index has already recorded a gain or loss of at least 2% 37 times, when there will only be seven such sessions in all of 2021. The Dow ended the week with a gain of 1.15%, while the S&P 500 ended with a loss of 1.56% and the Nasdaq ended with a loss of 3.11%.?

The price of gold also declined 3% during the last week. If the latest US inflation reading remains high, it is clear that the Federal Reserve will have no choice but to ramp up its efforts to curb the surging CPI.?

Assessing the Gain of Major Banks

JPMorgan Chase and Wells Fargo are the first major banks to declare their results for the current financial year. JPMorgan was able to exceed forecasts for both its profit and its revenue because its results were, in part, driven by gains from interest income. The Chief Executive Officer of JPMorgan, Jamie Dimon, acknowledged the positive aspects of the economy but also issued a cautionary statement, indicating that there are significant headwinds immediately in front of us – stubbornly high inflation leading to higher global interest rates, the uncertain impacts of quantitative tightening, the war in Ukraine, which is increasing all geopolitical risks, and the fragile state of oil supply and prices.

Furthermore, a 36% rise in net interest income led to a total of $12.1 billion in revenue for Wells Fargo, which contributed to the company's overall revenue of $19.5 billion for the period. After incurring expenditures related to regulatory and litigation at an anticipated 45 cents per share, Wells was only able to make 85 cents per share for the quarter, which was below the company's estimates for profits.

Don’t Forget to Adopt a Long-Term Outlook

“If you don't feel comfortable owning a stock for ten years, you shouldn't own it for ten minutes.”

It might be nerve-wracking to experience things like reading pessimist?headlines or seeing the value of your assets collapse. Even solid stocks have seen their values fall by as much as 30%, 50%, or even more over the course of 2022. That being the case, the time that you have right now to make investments in high-quality companies while they are virtually on sale is ideal. After all, investing is a risky endeavour by its very nature, so you should expect some challenges along the road.

When there is volatility in the market, it is essential for investors to keep their composure and recall the long-term approach they have adopted. Make sure that the overall degree of risk in your investment portfolio is one that you are comfortable with. Remember that the more risk you accept, the lower the possible returns will be.

It is possible that it may take many months for the market to recover completely, but it will ultimately revive. However, it is far more probable that you will experience positive average returns over the long term.

For those who want to reap the benefits of these uncertain times and choose to look at what lies ahead, I am here to accompany you on your financial journey!

Thanks!

Luke