Those factors have helped investors brush off price pressures as temporary—a point Federal Reserve chief Powell has been hammering home for months. However, corporations and consumers haven’t been able to do the same as easily. Companies such as paints and coatings producer PPG Industries Inc., beverage-maker Coca-Cola Co. and industrial supplies distributor Fastenal Co. have already warned of higher costs, a few weeks into the second-quarter reporting season.
Meanwhile, the average American is also feeling the squeeze. CPI jumped 5.4% in June versus a year earlier, while year-over-year average hourly earnings growth clocked in at 3.6%. That means consumers are paying more on average, while their wage increases lag behind.
“It’s just a function of timing and the difference between how Main Street thinks about this, and how the market thinks about this,” said Art Hogan, chief strategist at National Securities. “The market truly believes a lot of this is transitory, where the consumer likely has a harder time believing that.”
But the divide between market complacency and corporate worry can only last for so long, according to Principal Global’s Shah. Should the supply-side pressures squeezing input costs higher fail to abate as quickly as investors expect, that will eventually bleed into markets, she noted.
“Company struggles now will eventually weigh on market performance,” Shah said.
This article was provided by Bloomberg News.