Download PDFThe most recent U.S. Consumer Price Index (CPI) data for October came in lower than economists’ expectations and showed declines across most categories. However, with inflation still above the Federal Reserve’s (Fed’s) 2% target, concerns continue to linger over whether inflation has fallen far and fast enough or if pockets of price stickiness remain. One area that is difficult to handicap is the housing market, where home prices are still out of reach for many Americans. Furthermore, the sector is a notorious lagging indicator; replacing it with a proxy may offer a more accurate view of current inflation relative to the Fed’s target. For example, as this chart shows, if CPI is adjusted to include current rental prices in place of shelter, inflation may already be below target. Obtaining an accurate read on inflation is critical to gauge whether the Fed has tightened enough—or too much.
Groupthink is bad, especially at investment management firms. Brandywine Global therefore takes special care to ensure our corporate culture and investment processes support the articulation of diverse viewpoints. This blog is no different. The opinions expressed by our bloggers may sometimes challenge active positioning within one or more of our strategies. Each blogger represents one market view amongst many expressed at Brandywine Global. Although individual opinions will differ, our investment process and macro outlook will remain driven by a team approach.
