Inflation dropped 0.4% in June, the biggest drop since 2020 — but is the worst over? How to safeguard your portfolio
Inflation dropped 0.4% in June, the biggest drop since 2020 — but is the worst over? How to safeguard your portfolio.
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In a surprising shift, inflation cooled in June, according to new data released Tuesday by the Bureau of Labor Statistics (1). The latest numbers signal the largest monthly decline in consumer prices since the early months of the COVID-19 pandemic, bringing some relief to Americans after months of rising costs.
Specifically, the Consumer Price Index (CPI) fell 0.4% last month, the largest monthly decline since April 2020.
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Annual inflation also slowed sharply to 3.5%, down from 4.2% in May.
The biggest driver was energy. This index dropped 5.7% during the month, while gasoline prices plunged 9.7%, exceeding continued increases in categories such as food and shelter.
Meanwhile, so-called core inflation, which strips out volatile food and energy prices, was unchanged in June and eased to 2.6% annually, suggesting underlying price pressures also moderated.
But savvy investors shouldn't assume inflation has been beaten.
June's report largely reflects energy prices before oil surged again amid renewed fighting involving Iran. Crude prices have climbed in recent weeks, raising concerns that higher fuel costs could creep back into inflation in the months ahead.
In short, while June's rate is a breath of fresh air, we aren't out of the woods yet. And given that the on-again-off-again war with Iran is back in force (2), one could expect history to repeat itself.
Inflation reports often move markets (3) because they influence expectations around interest rates, borrowing costs and economic growth. But reacting to every monthly data release can be a costly mistake.
Instead of trying to predict where inflation will go next, many successful investors focus on maintaining a diversified portfolio and investing consistently through changing market conditions.
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