Core PCE rose again in February: time to sell semiconductor stocks?
The Core Personal Consumption Expenditures (PCE) index, which is the Federal Reserve's preferred measure of inflation, rose by 0.2% in February. This marks the third consecutive month of increases, and has led some investors to question whether it's time to sell semiconductor stocks. Semiconductor stocks have been on a tear over the past year, with many companies seeing their share prices double or even triple in value. This has been driven by a combination of factors, including strong demand for chips from the automotive and consumer electronics industries, as well as the ongoing shift towards cloud computing and artificial intelligence. However, rising inflation could put a damper on this growth. Semiconductor companies rely heavily on global supply chains, and any disruption to these supply chains could lead to higher costs and lower profits. In addition, rising inflation could lead to higher interest rates, which would make it more expensive for companies to borrow money to fund their operations. So, should investors sell their semiconductor stocks in light of the latest inflation data? The answer is not clear-cut. While rising inflation is certainly a concern, it's important to remember that the semiconductor industry is still in a strong position overall. Demand for chips is expected to remain high for the foreseeable future, and many companies have strong balance sheets and are well-positioned to weather any short-term challenges. That being said, investors should still exercise caution and keep a close eye on inflation data going forward. If inflation continues to rise, it may be time to re-evaluate your semiconductor holdings and consider diversifying your portfolio to include other sectors that may be less vulnerable to inflationary pressures. In conclusion, while the latest Core PCE data is certainly cause for concern, it's important to remember that the semiconductor industry is still in a strong position overall. Investors should keep a close eye on inflation data going forward, but should not rush to sell their semiconductor stocks without carefully considering the long-term outlook for the industry.