[비즈한국] From an investor's perspective, a decrease in inflation due to falling oil prices is entirely different from a decrease in prices caused by businesses lowering them because of fewer customers. Before buying stocks based on news that inflation has cooled, you must first analyze why those prices did not rise as much.
The U.S. Consumer Price Index (CPI) for September will be released on the 14th, followed by the Producer Price Index (PPI) on the 15th. The Federal Reserve raised the benchmark interest rate last month, and this month's meeting is scheduled for the 27th–28th. If inflation stabilizes, concerns about further hikes will diminish. However, when choosing stocks, you must look at corporate profits as much as interest rate forecasts.
If the CPI comes out low, you must look at which items pulled down the overall figure. The August CPI rose 0.4% from the previous month, with gasoline prices jumping 3.9%, accounting for more than one-third of the total increase. The core CPI, which excludes food and energy, also rose by 0.3%. Even if the overall number goes down this time thanks to gasoline, if rents and service prices continue to rise, the burden of inflation remains. A more important signal is whether the month-on-month increase in the core CPI has been declining for several months.
You must also look at the PPI, which is released the next day. The Federal Reserve's 2% inflation target is based on the Personal Consumption Expenditures (PCE) price index, and some of the medical service prices included in the PCE are derived from the PPI. If financial firms raise their PCE forecasts after the PPI announcement, the effect of a positive CPI result will be halved. You should also keep in mind that even if the possibility of further rate hikes decreases, the Fed may maintain high interest rates for a long time.
The PPI is also necessary when evaluating corporate performance. If the price supplied by a flour supplier drops, the cost burden for food companies buying that flour decreases. However, you should look for the specific material items that the company in question actually uses rather than the overall PPI figure. If the company has remaining inventory bought at higher prices or if supply prices have been fixed for several months, it takes time for the reduction in costs to be reflected in earnings.
If consumers continue to buy products while costs are decreasing, that company becomes an investment candidate. If a food company can buy ingredients cheaply while maintaining product prices and sales volume, its profits will increase. For transportation companies, if they maintain their volume of work and freight rates, the decline in fuel costs remains as profit. The key is whether they can retain customers without significantly increasing discounts or advertising. If they have to spend their saved costs back on price cuts or promotions, profits will not grow as much as expected.
If inflation stabilizes and consumption and corporate profits remain resilient, it creates favorable conditions for buying U.S. stocks. If it is difficult to calculate the costs and sales volume of individual companies, index ETFs that hold large-cap stocks across various sectors, such as the S&P 500, are an alternative. This reduces the risk of picking the wrong company, but you still bear the losses if the market as a whole declines. You should also check whether your holdings are concentrated in a few large-cap stocks.
The judgment changes if inflation is slowing because companies are lowering prices due to a drop in customers. Even if a company maintains per-unit profit due to lower costs, if the number of units sold drops significantly, the company's total profit will decrease. In this case, the justification for rushing to buy consumer or cyclical stocks simply because interest rate pressure has eased becomes weaker. It is not too late to reduce new purchases, keep some in cash, and confirm the next round of earnings.
Which scenario it is will be revealed in retail sales, employment indicators, and the company's sales volume and next-quarter outlook. Even within the same consumer goods sector, there are companies where customers are increasing as consumers switch to cheaper products. For this reason, you must look at where actual customers and orders are moving. Even if you have found a company worth buying, the expectations may already be reflected in the stock price. If buying driven by expectations of good inflation data and profit recovery has already occurred, the stock price may not rise as much as expected after the announcement. You must also consider how expensive the current stock price is relative to the expected earnings.