Dow jumped 618 (below early highs), advancers over decliners better than 2-1 & NAZ gained 180. The MLP index added 2+ to 211 & the REIT index rose 3+ to the 424s. Junk bond funds continued to be purchased & Treasuries were lower, raising yields. Oil was off pennies but remained above 10 & gold went up 12 to 1854 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
The US economy is facing the worst inflation spike in a generation, but former Federal Reserve Chair Ben Bernanke said the price spike is not "anywhere near" what Americans experienced in the 1970s. "There
are some – and I say this in a very limited way – similarities like the
effects of energy shocks, for example," Bernanke said. "Broadly speaking this episode
and the 1970s episode are really quite different." Inflation is near a 4-decade high, with the price of everyday goods including cars, rent, food,
gasoline & health care soaring over the past year. But as unwelcome
as the rising prices are for Americans, inflation today is still a long
haul away from that of the 1970s. The Labor Dept reported this month that consumer prices jumped
8.3% in Apr on an annual basis, close to a 40-year high but down
slightly from the reading recorded in Mar. By comparison, inflation in
the 1970s remained elevated for almost the entire decade, eventually
peaking at a high of 14.8% in 1980 as spiking oil prices, rising
unemployment & easy monetary policy pushed the consumer price index
higher. The high inflation forced Fed policymakers to raise interest rates to nearly 20% that year. The
1970s episode posed a "much, much bigger shock" to the economy,
according to Bernanke, who led the Fed from 2006-2013, steering the
economy thru the worst of the 2008 financial crisis. He noted during
that period of stagflation – high unemployment coupled with high
inflation – the economy experienced 2 minor recessions & 2 major
recessions. "So far, there's nothing to indicate that we are anywhere near that situation," he added. On
top of that, rising consumer prices have forced the Fed to embark on
its most aggressive course to tighten policy in decades: Policymakers
raised rates by a ½-point earlier this month & have signaled that
similarly sized hikes are on the table at coming meetings. Bernanke said that today's Fed policymakers have "much more
credibility and more commitment to reducing inflation" than their 1970s
counterparts. "I do think that the Fed will bring inflation down over the next couple of years," he added.
Former Fed Chair Bernanke says inflation today isn't 'anywhere near' 1970s price spike
Americans already were getting nervous about the state of the national economy late last year, before the spate of surging prices and fears of a looming recession that have arisen in 2022, according to a Federal Reserve survey. The Fed's annual Survey of Household Economics & Decisionmaking for 2021 showed that just 24% thought national economic conditions were good or excellent. That was down from 26% in the pandemic-scarred 2020 & a tumble all the way from 50% in 2019. Similarly, those rating their local economies favorably totaled 48% last year, actually an improvement from the 43% in 2020 but a sharp decline from 2019′s 63%. The survey was conducted in Oct-Nov & came from interviews of more than 11K respondents. By then, inflation had just started heating up, with the consumer price index rising 6.8% in Nov from the same time in 2020, on the way to an 8.5% peak in Mar 2022. Also, Q1 growth as measured by GDP declined 1.4%, the first negative reading since the pandemic outbreak in Q1-2020. Despite their concerns about a slowing economy, households reported fairly strong financial circumstances. Some 78% said they were doing either OK or living comfortably, the highest reading yet for a survey that goes back to 2013. Low-income families saw particular growth in that category, jumping 13 percentage points from 2020 to 53%. Similarly, 68% said they could cover a $400 expense either with cash or a credit card, also a new high. The share of those saying they were worse off financially than a year ago fell 4 percentage points to 20%, but was still notably higher than 2019′s 14%.
Americans worried about the economy even before inflation boom, Fed survey shows
In a move to raise its economic profile & create another counterbalance to China within Asia, the US announced the Indo-Pacific Economic Framework (IPEF) with Asian partners including Australia, Japan & the Republic of Korea. It's a broad plan designed to help expand the US' “economic leadership” in the Indo-Pacific region. The group wants to set intl rules on the digital economy, supply chains, decarbonization & regulations applying to workers. Pres Biden has said tackling inflation is a priority & this framework is designed to help lower costs by making supply chains more resilient in the longer term. Importantly, the IPEF is not a free trade agreement. Biden faces political pressure from both the left & right in the US to avoid free trade deals. It also is not a security pact & is separate from the Quad defense group that includes the US, Japan, India & Australia, National Security Advisor Jake Sullivan said. Despite avoiding trade deals, the US wants to boost its profile in Asia's economic realm, where China is the dominant country despite American allies Japan & South Korea boasting large economies & India, a member of the Quad, growing by leaps & bounds.
U.S. announces major Asia economic deal in effort to boost profile, counter China
Gold futures closed modestly higher, finding support from a pullback in the $ & after snapping a string of 4 straight weekly declines. Gold for Jun rose $5 to settle at $1847 an ounce, with the most-active contract touching its highest closing value since May 11. Last week, it rose 1.7% as it bounced back from a 3-month low. Gold found some support today from a roughly 0.9% pullback in the $ as measured against a basket of 6 major rivals. A stronger $ can be a negative for commodities priced in the unit, making them more expensive to users of other currencies. Treasury yields, which move opposite to price, rose today, putting the 10-year rate near 2.86%, after it hit a 3½-year high earlier this month. Rising yields can be a negative for gold because they raise the opportunity cost of holding nonyielding assets.
Gold books 3-day winning streak after notching first weekly gain in a month
Oil prices were little changed, settling just slightly higher as worries over a possible recession vied with an outlook for higher fuel demand with the upcoming US summer driving season & Shanghai's plans to reopen after a 2-month coronavirus lockdown. West Texas Intermediate (WTI) crude settled up 1¢ at ($110.29) a barrel, while Brent crude futures settled up 87¢ (0.7%) to at $113.42. Multiple threats to the global economy topped the worries of the world's well-heeled at the annual Davos economic summit, with some flagging the risk of a worldwide recession. IMF Managing Director Kristalina Georgieva said she did not expect a recession for major economies but could not rule one out. Oil's losses were limited by expectations gasoline demand would remain high. The US was set to enter its peak driving season beginning on Memorial Day weekend at the end of this week.
Oil settles nearly flat; recession worry vies with higher demand
The Dow chart below shows stocks were vastly oversold, so buyers took advantage of lower prices. Buying in stocks was very strong in the first 2 hours of trading, then remained at the elevated levels until the last hour when day traders took profits which trimmed today's rebound. Bernanke's comments helped calm nervous investors. There will be more earnings reports this week along with GDP data for Q1.
Dow Jones Industrials
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