Inflation Is Cooling—What That Means for Your Financial Plan
The latest inflation report is in, and the news is positive—Core CPI for February came in at +0.23% MoM, better than the expected +0.29%. Unlike some past reports, this decline appears to reflect genuine easing in inflationary pressures, rather than temporary distortions.
What’s Driving the Slowdown?
A few key areas contributed to this lower-than-expected inflation number:
Shelter Costs: The biggest component of inflation, shelter, rose +0.29%, down from +0.33% in January.
Recreation Expenses: The second-largest contributor increased +0.81%, significantly lower than January’s +1.37%.
Used Cars: Prices rose +0.88%, but this is still much lower than January’s +2.19%. Given weak wholesale car prices, we expect this trend to reverse soon.
Auto Insurance: One of the biggest drivers of inflation in 2023 and early 2024, auto insurance slowed dramatically to +0.27%, down from a staggering +1.99% in January. This suggests that the steep insurance rate hikes of last year may finally be behind us.
What This Means for the Market
While this is encouraging news for the Federal Reserve’s fight against inflation, market volatility remains high. Tariff headlines have introduced uncertainty, making it harder for investors and business leaders to plan ahead. This lack of visibility has contributed to the recent market swings, including the sharp Nasdaq 100 drop earlier this week.
However, history tells us that such rapid declines are often investment opportunities rather than warning signs of a bear market. Outside of the COVID-19 crash in 2020, similar high-speed declines over the last two decades have typically marked turning points—leading to market recoveries in the following 3, 6, and 12 months.
What Should You Do?
It’s easy to get caught up in the headlines, especially when market volatility makes for dramatic news stories. But as we’ve seen time and time again, the data often tells a different story than public sentiment.
Right now, inflation is cooling, the Fed’s case for rate cuts is strengthening, and the broader economy remains stable. Yet, the market’s reaction to tariff uncertainty has created a sense of unease that isn’t necessarily supported by the fundamentals. Historically, these moments—where perception and reality are misaligned—have often been opportunities for patient investors, not warnings to exit.
That’s why staying the course is more important than ever. Investing success isn’t about reacting to short-term noise—it’s about focusing on long-term trends, disciplined decision-making, and trusting a strategy built to withstand uncertainty.
If you’re feeling concerned, let’s discuss your financial plan. Otherwise, remember that the market has weathered far worse than tariffs, and history suggests that following the data—not the fear—leads to better long-term outcomes.
Shean
Process over predictions.