News & Insights

Inflation Will Continue to Moderate

Trends for the three major components of inflation (goods, services ex-shelter and shelter) continue to fall meaningfully. The supply of labor is outpacing the demand for workers, leading to a rise in the unemployment rate and moderation in wage growth, tempering increases in the greatest cost component of the services economy. Deflation persists in the goods sector, with weak input price growth and excess factory capacity as well as tepid demand for domestic freight transport. Reported shelter inflation remains stubbornly high at 5%, but has come off a peak of 8%, with a growing supply of housing inventory, portending continued price moderation.

Inflation is headed toward the Federal Reserve’s target, with current rates of 2.5% for headline PCE and 2.6% for core PCE, already better than the Fed’s consensus projection for the end of 2024 and coming close to projections for next year. The Fed has made considerable progress in its bid to tame inflation, giving it impetus to shift focus to its other mandate of full employment, with unemployment already exceeding its projection of 4%. These latest reports indicating softening inflation and labor, following Chairman Jerome Powell’s comments in his Jackson Hole speech, will lead to an easing cycle kicking off in September, with successive cuts bringing the Fed Funds rate down to 4% or lower in 2025.

CPI Goods, Rent and Services YoY

Source: Bloomberg

No Glaring Issues in the PPI Data

Source: Oxford Economics/Haver Analytics

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Frost Investment Advisors, LLC, a wholly owned subsidiary of Frost Bank, one of the oldest and largest Texas-based banking organizations, offers a family of mutual funds to institutional and retail investors. The firm has offered institutional and retail shares since 2008.

Frost Investment Advisors' (FIA) family of funds provides clients with diversification by offering separate funds for equity and fixed income strategies. Registered with the SEC in January 2008, FIA manages more than $4.2 billion in mutual fund assets and provides investment advisory services to institutional and high-net-worth clients, Frost Bank, and Frost Investment Advisors’ affiliates. As of July 31, 2024, the firm has $4.8 billion in assets under management, including the mutual fund assets referenced above.

To determine if a fund is an appropriate investment for you, carefully consider the fund’s investment objectives, risk, charges, and expenses. There can be no assurance that the fund will achieve its stated objectives. This and other information can be found in the Class A-Shares Prospectus, Investor Shares Prospectus or Class I-Shares Prospectus, or by calling 1-877-71-FROST. Please read the prospectus carefully before investing.

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Frost Investment Advisors, LLC provides services to its affiliates, Frost Wealth Advisors, Frost Brokerage Services, Inc. and Frost Investment Services, LLC. Services include market and economic commentary, recommendations for asset allocation targets and selection of securities; however, its affiliates retain the discretion to accept, modify or reject the recommendations.

Frost Wealth Advisors (FWA) is a division of Frost Bank [a bank subsidiary of Cullen/Frost Bankers Inc. (NYSE: CFR)]. Brokerage services are offered through Frost Brokerage Services, Inc., Member FINRA/SIPC, and investment advisory services are offered through Frost Investment Services, LLC, a registered investment adviser. Both companies are subsidiaries of Frost Bank.

This commentary is as of Sept. 17, 2024, for informational purposes only and is not investment advice, a solicitation, an offer to buy or sell, or a recommendation of any security to any person. Managers’ opinions, beliefs and/or thoughts are as of the date given and are subject to change without notice. The information presented in this commentary was obtained from sources and data considered to be reliable, but its accuracy and completeness is not guaranteed. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not indicators or guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification strategies do not ensure a profit and cannot protect against losses in a declining market. All indices are unmanaged, and investors cannot invest directly into an index. You should not assume that an investment in the securities or investment strategies identified was or will be profitable.

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