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Investing Specialists

Inflation Shocker May Force the Fed's Hand

If the Fed stands true to its word, it really does need to act now based on this week's surprising PCE inflation data.

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World equity markets diverged a bit this week, with emerging markets led by China. Emerging-markets indexes were down about 0.5%, as was Europe, while U.S. markets were up about 1.5%. Stabilizing oil prices, fewer recession worries because of stronger U.S. economic data, and the winding down of a lackluster earnings season as well as tired sellers could all be explanations for the stronger U.S. results.

While the single-week U.S. data was nothing special, it follows a week of more than 3% price appreciation. Over the period, U.S. stocks are up over 5%, the best two-week run of 2016. That is up about 4% from the Feb. 11 low. Commodities also did well, gaining 1.2% for the week, the second-place performance rank for the week.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.