August 11, 2022

On Wednesday, the average price of gas fell to $4 a gallon; about $1 from it’s high in June. Gas prices play an important role in consumer sentiment, especially since most of us pass at least half-a-dozen gas stations on our way to work. As gas prices fall, experts believe that people will begin to travel more and spend more money, boosting our economy. To put this in perspective, the drop in gas prices coupled with the improving labor market pulled inflation down to 8.5% from a 40-year high in June.

We all live busy lives, and unfortunately gas is—and has been—a major factor in our day to day. It isn’t an area that we can “cut back” spending in like we can with fast food, online shopping, etc. But now that prices are beginning to fall, people will be looking elsewhere to spend their money.[i]

While we saw gas prices fall, we also saw the cost of food rise by 1.3% in July, 13.1% higher than July of last year. I know most of us aren’t happy about paying more at the pump AND at the store, but as the cost of oil and fuel fall, we may see a decrease in prices elsewhere as it will cost less to ship and produce food and other goods.[ii]

Chart of consumer-price index monthly charges

Data as of 8/10/2022

With the announcement of lower inflation on Wednesday, we saw a rally in the stock market. The S&P 500 was up 2.1%, the Dow Jones gained 1.6%, and the NASDAQ grew by 2.9%.[i] Regardless of consumer optimism and an improving job market, the Fed will need to see “tangible evidence and widespread evidence of disinflation occurring before [they] can be really confident,” and begin to slow down its rate hikes. [ii]

We aren’t out of the woods yet, but with greater consumer optimism and lower gas prices—we’re headed in the right direction.

If you have questions or want to make sure that you are in a good position for when the market rebounds, contact me today!