Investors were concerned about rising inflation in Q1, but the table seems to have turned as price levels in both wholesale and retail levels appear to have stabilized over the last few months.
Both the Producer Price Index (PPI) and Consumer Price Index (CPI) readings came down significantly over the last few months, easing concerns about a faster rate of interest rate hikes in 2018. However, while the inflation situation has stabilized a bit, the record-low unemployment and rising oil prices mean that consumer inflation will soon pick up again. This week, we will get to see if inflation has already started to go up in April or if the market will get some breathing room for the time being.
To sum up, most companies will produce stellar earnings reports in Q1, but in the end, the focus of the market will be on labor market data such as the JOLTS report as well as on the inflation situation.
Check out last week’s Market Glance here in which investors focused on McDonald’s momentum.