Core PCE eased further in December: ‘I’m still cautious’ on stocks

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on Jan 27, 2023
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  • Core PCE was up 4.4% YoY in December - in line with expectations.
  • Liz Young explains why she continues to be cautious on equities.
  • The benchmark S&P 500 index is currently up 6.0% year-to-date.

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S&P 500 opened down on Friday after the U.S. Bureau of Economic Analysis said the core personal consumption expenditures price index continued to ease in December.

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Liz Young is still keeping cautious on equities

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On a year-over-year basis, the Fed’s preferred inflation gauge was up 4.4% – in line with the economists’ forecast and down from 4.7% in November.

Still, Liz Young – the Head of Investment Strategy at “SoFi” is sticking to her cautious stance on the equities market. Speaking with CNBC’s Joe Kernen this morning, she said:

There are some bright spots in economic data, but the number of companies beating is below all of the longer-term averages. So, earnings aren’t impressive, considering we’ve already revised them down. So, I’m still cautious.

For the month, the core PCE came in up 0.3% – also in line with estimates.

Long-term investors can start testing the waters

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At 18 times forward earnings, Young dubs the benchmark index a bit too “exuberant”.

But she also finds now as a suitable time to selectively shop for growth stocks as long as you’re a long-term investor. On CNBC’s “Squawk Box”, Young said:

A lot of the high growth names are down a lot. Things like software and cybersecurity. So, you could enter now you have to enter knowing there’s a higher probability that things likely will get worse again before they get better.

Also on Friday, spending was reported down 0.2% for December (adjusted for inflation) versus a 0.1% decline expected, adding to the narrative that the U.S. economy is headed for a recession in 2023. S&P 500 is up 6.0% for the year at writing.

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