Shares of the investment management company Franklin Resources (BEN 0.20%) were riding high on Thursday, surging 12.1% in the morning, and they were still up about 10.2% as of 1 p.m. EDT today. But the stock remains down 25% year to date.
The company rode a market surge that saw the Nasdaq jump around 6%, the Dow Jones industrial Average climb some 2.6%, and the S&P 500 move up about 4.2% as of 1 p.m. EDT.
The primary catalyst for Thursdayʻs gains was the news that lifted all boats higher: The October Consumer Price Index (CPI) report finally showed that inflation was ticking down, even though it was still up 7.7% from a year ago. That is lower than the 8.2% year-over-year increase in September and better than what was expected in October by analysts.
The core CPI, which excludes food and energy costs, was also lower than expected at 6.3%.
This is the first time since the Federal Reserve began aggressively raising interest rates that we have seen the inflation number tick down in a meaningful way. The market is hoping that perhaps the Fed will slow down its rate hikes after four straight increases of 75 basis points. But considering inflation is still way above the desired 2%, the Fed will need to see that downward trend continue.
The CPI number certainly helped Franklin Resources, because as an investment manager that runs the Franklin Templeton fund group, among others, reduced inflation should help the market -- and Franklin is going to thrive when the market is up.
Investors also reacted positively to Franklinʻs October report for assets under management (AUM), which it released yesterday afternoon. The firm posted AUM of $1.318 trillion as of Oct. 31, which was up 1.6% from September. The number does not include $35 billion in assets Franklin brought in through its acquisition of European credit and private debt manager Alcentra.
The gain was due to the overall rise in the stock market and equity assets. That was offset by net outflows, primarily from a $2.1 billion fixed-income institutional redemption.
We do not know if the market has hit bottom yet, but a steady shift upward would certainly be a positive for this asset manager.