Evaluating Fed Policy Impact on Inflation: Insights from Morgan Stanley's Shalett

• Lisa Shalett, Chief Investment Officer of Morgan Stanley Wealth Management, argues that Federal Reserve policy has had minimal impact on inflation trends. She points out that nearly all declines in month-over-month consumer price inflation since 2022 occurred before the full effects of Federal Reserve rate hikes were felt in the economy.

• Shalett highlights the concept of long, variable lags in the effects of monetary policy, where it can take anywhere from nine months to two years for Fed rate hikes to influence inflation. The Fed began hiking rates in aggressive 75-basis-point increments from June 15, 2022. Despite this, the month-over-month CPI rate peaked at 1.3% for June but swiftly fell to almost zero by July's reading, remaining at or below 0.5% since then.

• In a recent note, Shalett questions the efficacy of Fed policy in driving inflation changes, suggesting that the observed declines occurred before policy measures could take effect. She raises doubts about the Fed's confidence in its ability to stimulate inflation, particularly in light of these observations.

Charles Schwab's Strong Performance in Q1 Driven by Market Rally

• Charles Schwab (SCHW) reported robust first-quarter results, surpassing profit and revenue estimates amid a favorable macroeconomic environment. The discount brokerage and financial advisory firm noted a significant improvement in investor sentiment during the first three months of the year, buoyed by the rally in U.S. equities.

• Despite a decline in revenue by 7.3% to $4.74 billion compared to the same period last year, Schwab posted earnings per share (EPS) of 74 cents, exceeding analysts' forecasts. The company attributed its performance to strong equity markets and organic asset gathering during the quarter.
• Key highlights of Schwab's first-quarter performance include a 3% increase in active brokerage accounts to 35.3 million, a 15% rise in trading volume, and a 9% increase in margin balances. However, total net new assets experienced a significant decline of 41.5% to $88.2 billion.
• Schwab's shares surged 4.1% to $72.92 in early trading, reflecting investor confidence in the company's ability to capitalize on market opportunities and deliver strong financial results. With a gain of more than 38% in the last 12 months, Schwab continues to demonstrate resilience and growth in a dynamic market environment.

The Key Insights of Lisa Schalett and Charles Schwab

• Explore insights from Lisa Shalett of Morgan Stanley Wealth Management on the impact of Federal Reserve policy on inflation trends and the efficacy of interest rate hikes in influencing consumer price inflation. Dive into an analysis of Charles Schwab's first-quarter performance, highlighting its strong financial results amid a favorable market environment and increased investor confidence. Explore key metrics such as earnings per share, revenue, active brokerage accounts, and trading volume.