June 14, 2022

Inflation soared beyond expectations in May; that combined with rising rates and concerns over a recession caused the S&P 500 to plummet more than 20% from its highs. Cincinnati Business Courier reporter Steve Watkins notes, Cincinnati stocks also got hammered. He asked our Jim Russell the effect of rising rates on economic growth:

“That reduces consumer and business demand,” Russell said. “This often results in lower earnings for companies and thus lower prices for stocks.”

Jim notes:  it usually takes several months of rising rates to lower demand and slow inflation.

“Fighting inflation is like putting toothpaste back in the tube,” Russell said. “It is difficult, more painful than you think and it takes longer than you think.”

For now, Jim says, there are areas of the market that are a bit safer.

“When rates are higher, investors flock to companies that make things that people need every day, staples companies,” Russell said. “Both Kroger and Procter & Gamble fall into the staples category.”

 

 

 

Jim Russell
Portfolio Manager
jrussell@bahl-gaynor.com

See the entire article HERE