Weekly Market Commentary

INFLATION’S IMPORTANCE TO FINANCIAL MARKETS CANNOT BE OVERSTATED

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial
Jeffrey Roach, PhD, Chief Economist, LPL Financial
Adam Turnquist, CMT, Chief Technical Strategist, LPL Financial

Inflation’s effects on the economy, monetary policy, and the financial markets are wide-ranging. Higher inflation can constrain economic growth, tighten financial conditions, drive interest rates higher and even restrain stock valuations — higher inflation dampens the present value of future earnings and, historically, correlates with lower stock valuations. Will the recent encouraging reports on inflation convince the Federal Reserve (Fed) to cut rates sooner rather than later? In this week’s Weekly Market Commentary, we explore the current inflation dynamics, how stocks react within various inflation scenarios, and what sectors have rebounded the most since the initial tariff tantrums.

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