LPL Market Signals: Let’s Talk About Inflation

Market Blog

Wednesday, March 31, 2021

Is higher inflation on the way? This is the question nearly everyone is asking, and this week the LPL Strategists will explain why the answer is likely no, contrary to what so many expect. They will also take a look at April seasonality, along with the recent rough patch we’ve seen in some economic data.

Inflation

One of the top questions LPL Research receives is about inflation. With record spending, coupled with record monetary and fiscal stimulus, there are many that think massive inflation is coming. The LPL Strategists discuss it is likely we could see as much as a 3% jump in inflation over the coming months, but this will likely be transitory. The factors that held inflation back over the past decade are still in play. Forces like technology, globalization, workforce structure (more robotic automation), and the Amazon effect all should contain inflation in our view.

April is here

Stocks seem to love the month of April, with the S&P 500 Index up 14 of the past 15 years during this month. It is one of the best months of the year with most of the gains tending to occur in the early part of the month.

View enlarged chart.

Economic Slowdown?

Pockets of economic data are showing a potential slowdown. The strategists believe it is mostly weather related and not the start of a broader slowdown.. More people are going to restaurants and movies, while millions are being vaccinated each day, signaling the great reopening is alive and well.

View enlarged chart.

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