Lower Inflation should be good for stocks

 The eurozone inflation rate fell to 9.2% in December. That might not look like much next to its reading of 10.6% in October. But the region has now seen two straight months of declines. Take a look...

This is great news. The ECB will still have to send rates higher... but at least inflation is moving in the right direction.

Without the inflation-beating playbook of the U.S., it would be hard for the markets to know whether this decline is a fluke or the beginning of the end for eurozone inflation. But if we compare this data with what has happened in the U.S., peak inflation in Europe is close... or has potentially already passed.

In the U.S., inflation peaked at 9.1% in June... less than four months after the Fed started aggressively hiking interest rates. That's where Europe is in its rate-hike process right now.

So any further drop in inflation will reassure investors that the ECB's plan is working. And with less uncertainty, European stocks can go higher.

The Fed's aggressive interest-rate hikes are curing inflation domestically. And although the rest of the world is behind schedule, they now have a playbook to guide them.

That means 2023 won't just be a good year for U.S. markets... Stocks overseas will likely head higher as well.