Reinhart Week in Review by Madison Investments 5.31.2024


INFLATION

In April, the Personal Consumption Expenditure deflator (PCE) rose 0.3% and 2.7% year-over-year. Core PCE, the Fed’s preferred measure of inflation, rose 0.2% for the month and 2.8% over the last twelve months.

Our Take: Year-over -year core PCE at 2.7% is the lowest print since March 2021, giving rise to some hope that inflation is starting to move toward the Fed’s 2% target. However, annualizing the last six months core PCE shows inflation at 3.2%, the highest this measure has been since last July. This really comes as no surprise given the reignition of inflation earlier this year. The April inflation data represents an improvement, but Fed sentiment will not change unless there are more reports like this one in the coming months.

PERSONAL INCOME AND SPENDING

Personal income rose 0.3% in April while spending increased 0.2%. Real personal spending (adjusted for inflation) fell 0.1%.

Our Take: For the past few years, spending has outstripped income on a consistent basis. This has led to today’s record credit card debt and low savings rate. While the spending has driven economic growth, the party cannot go on forever. A slowdown in spending would help the fight against inflation, but at the expense of growth.

MUNICIPALS

Moody’s Investors Service upgraded Maine’s credit rating from Aa2 to Aa1. Moody’s cited the state’s “structurally sound budget” along with “sustained financial improvements including a large increase in reserves and solid pension contributions practices” as reasons for the upgrade.

Our Take: In recent years, Maine lawmakers and Governor Janet Mills have worked to produce balanced budgets and increase the state’s rainy-day fund balance. In addition, Maine’s economy has grown. Taken together, the state’s financial strength has improved.

“Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC (“MAM”), and Madison Investment Advisors, LLC (“MIA”). MAM and MIA are registered as investment advisers with the U.S. Securities and Exchange Commission. Madison Funds are distributed by MFD Distributor, LLC. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer and is a member firm of the Financial Industry Regulatory Authority. The home office for each firm listed above is 550 Science Drive, Madison, WI 53711. Madison’s toll-free number is 800-767-0300.

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This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Although the information in this report has been obtained from sources that the firm believes to be reliable, we do not guarantee its accuracy, and any such information may be incomplete or condensed. All opinions included in this report constitute the firm’s judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

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The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

The Producer Price Index (PPI) is a family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services.