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Company: Exelixis (EXEL)

Business: Exelixis, an oncology-focused biotechnology company, focuses on the discovery, development, and commercialization of new medicines to treat cancers in the United States. They have produced four marketed pharmaceutical products, including their flagship molecule, cabozantinib.
Stock Market Value: $6.3B ($19.46 per share)

Activist: Farallon Capital Management

Percentage Ownership:  7.5%
Average Cost: $17.47
Activist Commentary: Farallon Capital is a $36 billion multi-strategy hedge fund founded in 1986. Farallon’s investment strategies include credit investments, long/short equity, merger arbitrage, risk arbitrage, real estate investments and direct investments. Farallon is not an activist investor but will pursue an activist agenda when it feels forced to do so. The firm does not seek a fight but will not back down from one, either.

What’s Happening?

On April 5, Farallon sent a letter to the company announcing its nomination of the following director nominees for election to the board at the company’s 2023 annual meeting: (i) Tomas Heyman, interim CEO at Interlaken Therapeutics and former president of Johnson & Johnson’s corporate venture capital group, (ii) David Johnson, managing partner of Caligan Partners, and (iii) Robert Oliver, the former CEO of Otsuka America Pharmaceutical and an executive advisor. Farallon also expressed its belief that Exelixis should focus its research and development efforts and spending, communicate a differentiated and coherent strategy, as well as commit to ongoing distributions of excess capital to shareholders.

Behind the Scenes

As the strategy of shareholder activism has become more mainstream, it has been utilized by a larger breadth of investors. For the average investor it is hard to distinguish between shareholders using activism as a short term and opportunistic tool and real long-term investors using shareholder activism because the company is in desperate need of change and the shareholder has exhausted all other amicable options. This situation is the latter. Farallon did not buy the majority of its shares in the last 60 days like we often see from opportunistic investors filing 13Ds. The firm has been a shareholder of Exelixis since 2018 and is just now going public with their concerns. It has given management more than enough time to create shareholder value. Further, Farallon is not using an activist template like we see from novice activists where they criticize everything from board share ownership to executive compensation. Rather, the firm is focusing on glaring company issues and opportunities.  

The firm takes issue with the level of R&D and the lack of discipline and communication with respect to an R&D plan. Every company that spends a material amount on R&D should have a disciplined plan articulated to the market, but that is even more crucial for a company like Exelixis that spends over 50% of its revenue on R&D. In 2022, the company had $1.6 billion in revenue with an R&D budget of nearly $900 million, leading to earnings before interest, taxes, depreciation and amortization of $222 million. This R&D budget is expected to increase to more than $1 billion in 2023. To make matters worse, the company is investing in many projects in scientific and clinical areas where it lacks differentiation and a competitive advantage. Instead of becoming more focused and disciplined, Exelixis is doing the opposite: pursuing 27 indications across 79 trials using at least three very different therapeutic modalities, a total that is much higher than any of their peers. Investors want to see a reasoned, disciplined R&D plan that explains the differentiated approach and competitive advantage the company is exploiting so that they can assess the likelihood of success.
Farallon estimates that the net present value of the company’s cabozantinib cash flows alone (with a modest R&D program) is worth in excess of $33 per share. Farallon would also like to see Exelixis commit to a much larger share repurchase program than the $550 million it has announced. The company has over $2 billion in cash and investments versus virtually no long-term debt and using a portion of this cash to buy back shares ahead of any R&D restructuring would not only create shareholder value but will help add discipline to management by forcing them to run a leaner operation without a cash stockpile on the balance sheet.
While improving margins and buying back stock may seem to be a typical activist play, it is not Farallon’s typical play. In the firm’s 2021 engagement with health-care company Acceleron Pharma, the firm suggested the opposite plan. At Acceleron, Farallon was in favor of increased R&D and opposed Merck’s acquisition of the company, lobbying for a standalone company which had significant prospects following the positive results of the Phase 2 trials of its pulmonary drug. Ultimately, Merck acquired Acceleron in the face of Farallon’s opposition, and the pulmonary drug’s Phase 3 trials have been a success. It’s expected to hit the market later this year, and Merck is slated to make an oversized return on this acquisition.
Farallon is making a very reasonable request to add three board members to Exelixis’s 11-person board. We believe this is reasonable just based on the company’s lack of discipline with respect to R&D and its serial underperformance compared to the market and its peers. However, other than three female directors added to the otherwise all-male board since 2016, the company has not added a new director since 2010. Eight of the 11 directors have been on the board between 13 and 29 years, for an average of over 20 years each. What is worse is that the board dismissed Farallon’s overtures; the firm said it was told that “the Board does its own refreshing.” Three new directors in the past 13 years is the company’s idea of board refreshing. It is one thing to have bad corporate governance; it is quite another to not even recognize bad corporate governance when you see it.
Farallon is nominating only three directors to this board, and it befuddles us as to how Exelixis does not see this as a gift. Assuming Farallon is targeting the three directors who have been on the board for 26 years, 22 years and 19 years, the firm is sparing three directors who have been on the board for 19 years, 18 years and 16 years, not to mention the chair and CEO, who have been on the board for 29 years and 13 years, respectively. All five of them are male. We do not see how Institutional Shareholder Services and the large institutional stockholders who own 25% of the company’s common stock could support these long-tenured directors if presented with a competing slate of qualified, fresh, diverse directors. In our opinion, Farallon could have won six seats on this board and should take three seats in a cake walk. Farallon has nominated three very qualified directors. Tomas Heyman is a venture investor formerly of Johnson & Johnson; Robert Oliver is the former CEO of a pharmaceutical business; and David Johnson is an experienced shareholder investor who is well versed in corporate governance and shareholder activism. Johnson, formerly a Carlyle Group managing director, is the founder of Caligan Partners, a fund that uses activism as a tool to unlock value.
This seems like the type of situation that should settle. Less than a week ago, that was the case when the parties had reached a near-final agreement which included the appointment of two Farallon nominees (Heyman and Oliver), the retirement of two long-standing existing directors and the formation of a new Capital Allocation Committee. However, Exelixis claims that the deal was derailed when Farallon requested too much confidential information related to their R&D strategy, their pipeline, people and clinical trial data.
On April 13, the company announced that two incumbent directors were resigning from the board and it was recommending that shareholders vote for Heyman and Oliver to replace them. This was not done as part of a settlement with Farallon but likely to effectively implement a settlement offer that Farallon had previously rejected. The company may be hoping that this will prevent shareholders from voting for Farallon’s third nominee, David Johnson. This is a tactical move that was made much easier by the implementation of the universal proxy card. The unfortunate part of this is that often the nominee the company resists the most is the one who is most needed. That is true in this case. As a sophisticated shareholder investor with activist experience, we believe David Johnson was the candidate most capable of reining in management’s R&D spending and further refreshing a board that still needs many newer directors. However, if Farallon gets tactical, the firm can orchestrate it so any two of its three nominees who they select will be elected to the board with a free option for the third.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. More

As the cost of living rises, Americans are leaning more on credit cards.
However, that type of debt is costlier than ever with credit card interest rates at an all-time high.
Here are the three best ways to pay down expensive credit card debt once and for all.

Collectively, Americans owe more on credit cards than ever before. And they’re paying a higher price for it, as well.
The average annual interest rate for credit cards is now near 21%, according to data from the Federal Reserve — marking the highest rate since the Fed began tracking this figure nearly three decades ago.

With rates at record highs, households carrying credit card debt will pay an average of $1,380 in interest alone this year — up from $1,029 last year, a NerdWallet study found.
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As the Fed raises rates to cool inflation, it’s becoming even costlier to borrow. With another possible hike on the horizon, average credit card annual percentage rates, or APRs, could still move higher in the months ahead, according to Greg McBride, chief financial analyst at Bankrate.com.
Sky-high APRs make credit cards one of the most expensive ways to borrow money from month to month. However, there are some tools and tricks to help pay down that balance.
Here are the three steps experts most often recommend.

1. Avail yourself of balance transfer cards

Cards offering 15, 18 and even 21 months with no interest on transferred balances “can be your best friend on the path to getting out of credit card debt,” McBride said.
“The 0% will shield you from interest charges and further rate hikes, but you’ll still have to do the dirty work of actually paying down the debt.”

Making the best use of a balance transfer boils down to making those payments on time and aggressively paying down the balance during the introductory period.
If you don’t pay the balance off, the remaining balance will have a higher APR applied to it, which is generally about 23%, on average, in line with the rates for new credit.
Further, there can be limits on how much you can transfer, as well as fees attached. Most cards have a one-time balance transfer fee, usually around 3% to 5% of the tab. And one late payment can negate your no-interest offer.

2. Consider a personal loan

Otherwise, consider a debt consolidation loan, which is a type of personal loan that allows you to combine interest from multiple credit cards into one low-interest fixed payment, advised Sara Rathner, a credit cards expert at NerdWallet.
“The interest rate will depend on your credit, but it may be worth it if the cost of interest and fees are significantly lower than what you’re currently paying on your credit cards,” Rathner said.

Currently, those rates are around 10%, on average, still well below what you may have on your credit card.
Further, borrowers may find it simpler to budget for a fixed monthly payment until the debt is paid off, Rathner added. “That can be easier to wrap your head around.”

3. Employ a debt-payoff method

Most experts also recommend coming up with a strategy to stay motivated. The two most common are the avalanche method and the snowball method.
The avalanche method lists your debts from highest to lowest by interest rate. That way you pay off the debts that rack up the most in interest first.
Alternatively, the snowball method prioritizes your smallest debts first, regardless of interest rate. The idea is that you’ll gain momentum as the debts are paid off and that will motivate you to keep going.
With either strategy, you’ll make the minimum payments each month on all your debts, and put any extra cash toward accelerating repayment on one debt of your choice.
“Avalanche will save you more on interest over time, but if your priority is knocking out the first couple of debts really fast to stay motivated, that’s where snowball comes in handy,” Rathner said.
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Nothing is ever a sure bet, but artificial intelligence technology looks set to grow and profoundly alter the way we do things.
No one knows if today’s big tech players will take the lead in AI, but investors might looks at supporting players in the field for good investment opportunities.
These firms include Nvidia, Advanced Micro Devices and Arista Networks.

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The rise of ChatGPT has sparked another national conversation about artificial intelligence.
Depending on your viewpoint, the bot is either the key to making a host of companies and their workers more efficient, or it’s a slippery slope toward robots eventually taking over society, leaving millions jobless.

While the truth probably lies somewhere in the middle, what is clear is that all the big tech companies think AI will be a huge profit driver in the years ahead.

More from Ask an Advisor

Here are more FA Council perspectives on how to navigate this economy while building wealth.

That has poured more fuel on an arms race that has been going on for years in AI. (Remember when everyone started to pour billions into driverless car technology?)

Determining a winner

Naturally, investors are thinking about who will come out ahead. It may seem like a sure bet that it will be one or a combination of Amazon, Alphabet, Facebook and Microsoft, each of which has nearly limitless resources to spend. But it’s hard to know for sure.
History is littered with examples of companies that once enjoyed a dominant position in an industry, only for them to slack off and become forever weakened. Yahoo! at one time was synonymous with the internet, ruling search. Now it has a little over 1% of that market.

BlackBerry was a status symbol as recently as 2010, when it was the top smartphone platform. Today, the device is barely functional after the company shut off a host of services last year.

This is partly why investing in AI could be a classic pick-and-shovel play. Not only are Amazon, Alphabet, Facebook and Microsoft all mature companies, but there’s no guarantee any of them will become the undisputed king of AI.

A time to wait

Therefore, the safer bets could be on the companies that will help make that a reality, regardless of who wins the AI arms race. At the same time, it’s probably best to wait for a better opportunity to jump in because anyone going headlong into AI now will pay a steep price.
The largest cloud service providers, or hyper-scalers, today each have millions of servers in data centers scattered across the country. The portion of those servers running AI workloads — including powering a chatbot, a chess-playing machine, a driverless car and everything in between — will need to go through a massive upgrade cycle to add capacity.
Investors have taken notice.

The iShares Semiconductor ETF — a collection of the 30 largest U.S. listed companies involved in producing memory chips, microprocessors, integrated circuits and related equipment — is up about 23% year-to-date. If you drill down further, a couple companies within that fund have done even better.
Nvidia has gained more than 80%, while Advanced Micro Devices, Inc. has advanced by more than 50%. Together, these firms control about 29% of the graphics processing unit market. GPUs are essential for AI because they help to process massive amounts of data.
Meanwhile, Arista Networks has climbed over 30% this year. The company produces network switches for large data centers that enable connectivity between devices in a network. It enjoys about a 10% share of that market.

Good news is bad news

These are all great companies, and it’s hard to see the AI revolution moving forward without them. Still, making a case for any of them at their current valuations is nearly impossible. Yet, in a classic case of bad news is good news, they could become more attractive later this year.
The banking industry has thus far averted disaster, with contagion fears associated with the closure of Silicon Valley Bank and Signature Bank — as well as the issues related to Credit Suisse — having dissipated in recent days. Even so, it’s reasonable to expect tighter loan conditions in the near term across the banking sector.
That could stifle personal consumption and business investment, pushing an economy already struggling with higher interest rates and elevated inflation over the edge. That would put pressure on stocks, leading to broad-based declines.
While that wouldn’t be a great development overall, it may provide an opportunity to make the best of a bad situation by adding AI exposure — including the likes of Nvidia, AMD and Arista Networks.  
— By Andrew Graham, founder and managing partner of Jackson Square Capital More

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The share of women who earn as much as or significantly more than their husbands has roughly tripled over the last half-century, according to a new Pew Research Center survey.
But as women’s financial contributions increase, they still pick up a heavier load when it comes to household chores and caregiving responsibilities, the report also found.

More women are becoming breadwinners, but the division of labor at home has barely budged, a new report found.
Although men still out-earn women in most households, the share of women who earn as much as or significantly more than their husband has roughly tripled over the last half-century, according to a new Pew Research Center survey and analysis of government data.

Today, 55% of opposite-sex marriages have a husband who is the primary or sole breadwinner, down from 85% 50 years ago, Pew found.
Now, both spouses earn about the same amount of money in nearly one-third, or 29%, of such marriages, up from only 11% in 1972.

And about 16% of opposite-sex marriages have a breadwinner wife, a jump from just 5% five decades ago, the analysis found.
Women are achieving increasing levels of education, making them more likely to out-earn their husbands, according to Richard Fry, a senior researcher at Pew.
But as women’s financial contributions increase, they still pick up a heavier load when it comes to household chores and caregiving responsibilities, the report also found.

“The reality is, the majority of traditional marriages still adhere to traditional gender roles,” said Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York. She is also a member of the CNBC Financial Advisor Council.

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Age, race and family size also play a role, the Pew report found, with Black women, as well as older women and women without children, more likely to be the breadwinners.
Many studies show that women shoulder the brunt of the responsibilities at home, regardless of their financial contributions.
In marriages where husbands and wives earn about the same, women spend roughly 2 hours more a week on caregiving and about 2½ hours more on housework, according to the Pew data.
“Even though there may be more egalitarian marriages, their duties at home have not been equalized,” Fry said. “The gender imbalance in time spent on caregiving persists, even in marriages where wives are the breadwinners.”

The only exception is in marriages where the wife is the sole breadwinner, Pew found: In those marriages, husbands devote more time to caregiving. However, husbands and wives still spend roughly the same amount of time on household chores.
“Even there, it’s still the case that she does an equal amount of housework,” Fry said.
Eve Rodsky, author of “Fair Play,” said “this will not change on its own.”
Although there is no quick fix, there is a solution, she added. “Understand that it’s much more than meets the eye and tell your story,” Rodsky advised.
Francis said she also struggled with this early on in her marriage. “We had to have that conversation,” she said. Together, Francis and her spouse came up with a plan to tackle joint responsibilities at home and cover family expenses equitably. The key, she said, “is to talk about what’s working and what’s not working.” More

If inflation continues to fall at the current rate, the Social Security cost-of-living adjustment for 2024 may be less than 3%, according to The Senior Citizens League.
This year, Social Security beneficiaries saw a record 8.7% bump to their Social Security benefits, the highest in four decades.
To be sure, early estimates for next year’s COLA and Medicare Part B premium may change as the year progresses.

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New government inflation data shows inflation is cooling — and that could point to a lower cost-of-living adjustment, or COLA, for Social Security beneficiaries next year.
The Consumer Price Index for all Urban Consumers, or CPI-U, rose 5% from a year ago and 0.1% in March, according to data from the U.S. Bureau of Labor Statistics released on Wednesday.

Yet another measure used to calculate the Social Security COLA each year — the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W — rose 4.5% over the last 12 months and 0.3% for the month prior to seasonal adjustment.
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If inflation continues to fall at the current rate, the Social Security COLA for 2024 may be less than 3%, according to an unofficial estimate from The Senior Citizens League, a nonpartisan senior group.
To be sure, that is a very early estimate, according to Mary Johnson, Social Security and Medicare analyst at The Senior Citizens League. Gauging how much the increase for 2024 will be, if there is one, will be clearer toward the second half of the year, she said.
In 2023, Social Security beneficiaries saw an 8.7% bump to their Social Security benefits, a four-decade record prompted by high inflation.

The Social Security Administration recently revised its projections for how long its trust funds can continue to pay full benefits — moving the depletion date one year earlier, to 2034, in part due to the higher COLA. At that point, it is expected 80% of benefits will be payable, unless Congress acts sooner.
“Hopefully we don’t have as large of a COLA because it’s also bad of the trust fund to try to have to keep up with increasing benefits by that much,” said Kelly LaVigne, vice president of consumer insights at Allianz Life.
While a higher cost-of-living adjustment may not be great for Social Security’s trust funds, it does help put more money in beneficiaries’ pockets.
As the rate of inflation subsides, the cost-of-living adjustment may be lower, but grocery bills and other expenses may not eat up as much of retirees’ Social Security checks.

Recouping, regrouping could take some time

Still, it will take time for Social Security beneficiaries to recoup losses incurred from a couple of years of fast-growing inflation that outpaced cost-of-living adjustments.
This year’s 8.7% increase has exceeded the rate of inflation in every month of 2023 so far by an average of 2.6%, according to The Senior Citizens League.
Average benefits have recovered just $179.40 since the start of the year, the research found.

Hopefully we don’t have as large of a COLA.

Kelly LaVigne
vice president of consumer insights at Allianz Life

Yet average benefits fell short of inflation by about $1,054 from January 2021 to December 2022, according to the nonpartisan senior group.
Even so, beneficiaries may not necessarily be catching up this year due to Medicare Part B premiums.
The standard Part B premium is $164.90 this year, down from $170.10 in 2022.
Those premiums, which are typically deducted directly from Social Security checks, are likely completely consuming the extra money beneficiaries have seen from the cost-of-living adjustment so far, according to The Senior Citizens League.

While signs point to a lower Social Security COLA next year, the Medicare Part B premium may be higher. The estimate for 2024 is $174.80, according to the Medicare trustees report released last month.
Experts emphasize those numbers are subject to change.
“We won’t really know 100%” what the Social Security COLA or Medicare Part B premium for 2024 will be until later this year, according to LaVigne. More

After a federal judge in Texas struck down a key provision of the Affordable Care Act, experts say health insurance plans may scale back their preventive care coverage.
People could soon get higher bills for certain cancer screenings and disease-preventing medications.

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Tens of millions of Americans could be affected

The ACA’s preventive services mandate covered most people who have private health insurance, either through their employer or from the public exchange, Donovan said.
Around 100 million people with private insurance got preventive care required under the ACA in 2018, one estimate found, making it the provision with the widest reach. Insurers generally must not impose copays or deductibles on the recommended preventive care.
The ruling doesn’t appear to have a direct impact on those covered by Medicaid or Medicare, experts say.

Cancer screenings, heart meds among care at risk

The decision out of Texas means insurers are no longer required to provide free coverage based on recommendations made from the U.S. Preventive Services Task Force since 2010.
However, the other two panels that advise the government on preventive care, the Advisory Committee on Immunization Practices and the Health Resources & Services Administration, may have made similar recommendations that will prevent some kinds of care from losing coverage, Donovan said.

Still, because of the ruling, people in their late 40s may face higher costs for colorectal screenings.
Similarly, certain lung cancer screenings for adults between the ages of 50 and 80 with a history of smoking could be subject to new out-of-pocket costs, according to the Kaiser Family Foundation.
In addition, some medications to prevent heart disease, such as statins, and drugs to lower the risk of breast cancer may also be subject to copays, deductibles and coinsurance now.
Advocates are also concerned that costs will rise for PrEP, a medication highly effective for preventing H.I.V.

Changes unlikely to be immediate

Although the decision is likely to drive up health-care costs for some people, Kosali Simon, professor of health economics at the O’Neill School at Indiana University, said there was little reason for panic just yet.
“Many preventive care services are not covered by this decision,” Simon said.

Insurers are also not likely to make changes to their coverage in the middle of the plan year, she added. That means any reduced coverage might not kick in until 2024. It’s also possible insurers will wait until the legal disputes over the provision are resolved before amending their policies.
Health plans will still be required to ensure no copays for many preventive services, including birth control and mammograms, Simon said. Some states have their own mandates, meanwhile, on free preventive care.

Patients can check in with insurers

Those who are worried about changes to their health-care coverage should call their insurer and ask about any upcoming scheduled appointments, Donovan said.
Whatever you learn, Donovan said, “We recommend going forward with any planned appointments. These preventive services may save your life.” More

The consumer price index eased to 5% in March 2023 on an annual basis, down from 6% in February, according to the U.S. Bureau of Labor Statistics inflation report.
Energy and food prices declined in March. Housing prices have proven stubborn, but are expected to start falling in coming months, economists said.
Inflation for physical goods has largely eased. But that for “services” has been stickier, largely due to dynamics in the labor market, economists said.
Banking turmoil is expected to cool the economy and inflation in coming months.

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Inflation continued to retreat in March as energy prices pulled back from a year ago, when they began to spike due to Russia’s invasion of Ukraine.
But swings in gasoline and other energy mask price pressures that, while easing, remain under the surface, economists said.

“It’s improving and the economy is cooling, but it’s still far from tepid,” Diane Swonk, chief economist at KPMG, said of inflation.

The consumer price index, a key gauge of inflation, rose by 5% in March relative to 12 months earlier, the U.S. Bureau of Labor Statistics said Wednesday.
The index measures price changes across a broad basket of consumer goods and services, such as food, housing, electronics and recreation.
The latest annual reading declined from 6% in February. The reduction doesn’t mean prices fell; they’re still rising, just more slowly than a year ago.  
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A little bit of inflation is good — policymakers aim for about 2% a year, according to a different but related measure.
While still “painfully high,” inflation has eased significantly from its peak of more than 9% in June, said Mark Zandi, chief economist of Moody’s Analytics. Inflation seems poised to fall back to policymakers’ target by this time next year, barring any unforeseen derailments, he said.
“Inflation is fundamentally moderating,” Zandi said. “And all the trend lines look good.”
“I can say that with increasing confidence.”

What drove inflation in March 2023

Housing was a “notable” inflation driver in March and over the past year, according to the bureau.
The shelter index increased 8.2% in the last year, accounting for over 60% of the total increase in consumer prices after stripping out the volatile energy and food categories. Other notable annual increases include motor vehicle insurance, at 15%; household furnishings and operations, 5.6%; recreation, 4.8%; and new vehicles, 6.1%, the bureau said.
“There are a lot of categories that continue to see outsized increases month after month,” said Greg McBride, chief financial analyst at Bankrate. “And [some of] those are categories that are staples in the household budget.”
“We’ve got to see improvement in terms of moderating price pressures across a broad range of categories,” he added.
The overall energy index is down 6.4% in the past year.
Average U.S. gasoline prices topped out at over $5 a gallon in June, following a surge in oil prices after Russia invaded Ukraine in February 2022. The price increase for both regular motor gasoline and diesel fuel from February to March 2022 was the largest monthly gain on record, according to the U.S. Department of Transportation.

It’s improving and the economy is cooling, but it’s still far from tepid.

Diane Swonk
chief economist at KPMG

To compare, average pump prices were about $3.54 a gallon this March, according to the U.S. Energy Information Administration. They’ve risen in recent weeks after a bloc of major oil-producing nations announced output cuts.
Housing accounts for the largest share of average household expenses. Elevated inflation in housing has therefore served to prop up CPI readings.
There’s been a “huge” moderation in newly signed rent agreements, said Paul Ashworth, chief North America economist at Capital Economics. But price changes generally take nine months to a year to flow into CPI reports, due to how economists calculate price changes in the housing category, he said.
“The big uncertainty is: We know housing costs should start to moderate … soon [in the CPI], but none of us know exactly when,” Ashworth said.
The food at home index, i.e., grocery prices, fell 0.3% in March, its first monthly decline since September 2020. That’s due to a combination of things, such as lower prices for diesel, a key component in transporting food to stores, and easing supply chain issues, Zandi said.
“It signals the food inflation fever has been broken,” Zandi said.

Why inflation popped up and remains high

Consumer prices began rising rapidly in early 2021 as the U.S. economy started to reopen after the pandemic-related shutdown. Americans unleashed a flurry of pent-up demand for dining out, entertainment and vacations, aided by savings amassed from government relief.
Meanwhile, the rapid economic restart snarled global supply chains, a dynamic exacerbated by Russia’s invasion of Ukraine. In other words, supply couldn’t keep up with consumers’ willingness to spend.
Inflation was initially siloed in categories of physical goods such as used cars and trucks. But the dynamic has morphed.
“The supply shortage was very much a 2021, 2022 story,” Ashworth said.

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Now, inflation is more a story of “services,” which includes categories such as haircuts, auto insurance, airline fares, medical care and rent, economists said.
That’s largely due to conditions in the job market, characterized by historic demand for workers, low unemployment and strong wage growth, economists said. Higher labor costs pressure businesses to raise their prices, especially in labor-intensive service industries, economists said. While the labor market remains hot, it has been gradually cooling.
The U.S. Federal Reserve has been raising interest rates aggressively to tame inflation. This mechanism aims to increase borrowing costs for consumers and businesses, who pare back spending, thereby cooling the economy and labor market and, ultimately, inflation.
Recent turmoil in the banking sector is expected to reduce banks’ willingness to make loans — and those tighter credit conditions are expected to further cool the economy and help tame inflation.
That credit tightening will likely help cool inflation in the second half of the year, Swonk said.
“It’s a slow squeeze,” she said. More

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CNBC Financial Advisor Council members share their greatest money mistake, and what they learned from it.
In every case, their younger selves made tradeoffs that sacrificed their long-term financial well-being.

Mistakes happen, especially when it comes to money.
Even our most trusted sources for financial information and advice have their own regrets.

Here, CNBC Financial Advisor Council members share their greatest money mishaps, and what they do differently now. In every case, their younger selves made tradeoffs that sacrificed their long-term financial well-being.
Maybe if we can learn from them, we won’t fall into the same trap.
Money mistake: ‘I didn’t negotiate my first salary’
“When I first started in financial planning, I got an offer for $40,000 with a 401(k) and a 4% match and I thought I had won the lottery,” said Sophia Bera Daigle, CEO and founder of Gen Y Planning, an Austin, Texas-based financial planning firm for millennials. That elation led to a mistake: “I didn’t negotiate my first salary.”
However, the next year, the economy skidded to a halt, annual raises were sidelined and her employer rescinded the 401(k) match, she said. “For my first five years in financial planning, I made the same amount of money.”
Although wages were particularly stagnant during the Great Recession, salaries are in the spotlight once again as inflation weighs on most workers’ financial standing.

And still, more than half of workers don’t negotiate when given a job offer, CareerBuilder found.
Yet negotiating works. According to Fidelity, 85% of Americans — and 87% of professionals ages 25 to 35 — who countered on salary, benefits or both got at least some of what they asked for. 
Confidence is key, said Bera Daigle, who is also a certified financial planner and a member of CNBC’s Advisor Council. Know your worth and what you want. It may be a higher paycheck or increased opportunities for advancement, flexibility or vacation time.
“If you get a hard ‘no,’ ask what it would take for a salary increase to be on the table in six months,” she advised. “That’s really helpful too.”
Money mistake: Leasing ‘too much’ car

Thianchai Sitthikongsak | Moment | Getty Images

“My biggest money mistake was back when I was working at Smith Barney as an early financial advisor,” said Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, based in Irvine, California. “My colleagues at the time really encouraged me to get a new luxury vehicle and said that given what we do, a lease would be a good option.”
So, Sun, a member of the CNBC Financial Advisor Council, splurged on her dream car. “I signed a three-year contract and pulled off the lot with a shiny white convertible Mercedes Benz.
“Was it beautiful? Yes,” she said. “Was it the right way to spend my money? Absolutely not.”
These days, financing a new or used car is even more expensive, new research shows.

More from Ask an Advisor

Here are more FA Council perspectives on how to navigate this economy while building wealth.

Amid rising interest rates and elevated auto prices, the share of new car buyers with a monthly payment of more than $1,000 jumped to a record high, according to Edmunds. Now, more consumers face monthly payments that they likely cannot afford, according to Ivan Drury, Edmunds’ director of insights.
Sun said her hefty lease payments came at the expense of other investments. “I could have done so much more with the money and invested it for the future.”
In fact, most experts advise spending no more than 20% of your take-home pay on a car, including payments, insurance and fuel or electricity. 

I never bought another new car for myself again.

Winnie Sun
managing director of Sun Group Wealth Partners

Used vehicles could be a better deal. A certified pre-owned vehicle, usually one coming off a lease, often includes warranty coverage, which greatly reduces the worry that can also come with buying a used car.
“I never bought another new car for myself again,” Sun said. “And the money I save has gone into my kids’ college savings accounts and have grown nicely and is surely more valuable than a leased car.” 
Money mistake: Going all in on tech
“I came into investing during the ‘go-go’ 90’s, which were great years for the market,” said certified financial planner Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida. “We were invested in tech stocks and everything risky.”
These same companies largely took the fall when the dot-com bubble burst in 2000.
“We lost a lot of money when the market crashed,” said McClanahan, who also is a member of CNBC’s Advisor Council. 

“If we had known about diversification and using a low-cost passive approach, we would have been much better off.”
When it comes to investing, most experts recommend a well-diversified portfolio of stocks and bonds or a diversified fund, like an S&P 500 Index fund, to help weather the ups and downs rather than chasing a hot stock or sector.
Investors should also check back in regularly to review their investment allocation and make sure it is still working to their advantage. 
Money mistake: Unloading inherited stock
“My wife had inherited shares of Phillip Morris stock from her father,” said Lee Baker, a certified financial planner based in Atlanta.
But since smoking had contributed to his death, the couple wrestled with owning shares of the tobacco giant. At the same time, “there was discussion in Congress about a sin tax, so I figured it was a good time to sell.”
The legislation failed to get off the ground, however, and Philip Morris continued to thrive.  
“For me, the biggest lesson is to be careful about making investment decisions based on what politicians say they want to do,” said Baker, who is the founder, owner and president of Apex Financial Services and a member of CNBC’s Advisor Council.

Patcharanan Worrapatchareeroj | Moment | Getty Images

Still, some investors find it important to consider backing companies that reflect their values or lifestyle.
“Today, when we talk to clients about inherited stock, we still take the time to find out if there are any emotions attached to the stock, either positive or negative,” he said.  “Once we have a handle on the emotional side of the equation, we are in a better position to discuss the stock from an investment perspective.”
For some, that may mean shifting a portfolio away from owning tobacco, even though stocks like Philip Morris have been proven winners within the vice group.
Money mistake: Not considering long-term care
Most families don’t think about long-term care until there is a health crisis.
“I waited until we were in our mid-50s,” said Louis Barajas, CEO of International Private Wealth Advisors in Irvine, California. He is also a certified financial planner and member of CNBC’s Advisor Council.
“It was procrastination on our part or being too busy,” said Barajas. In the meantime, his wife, Angie, was diagnosed with colon cancer. “It will be a lot more expensive now, it might be unaffordable,” he said.
There are insurance options to help offset the costs — from traditional long-term care insurance to hybrid policies that combine life insurance and long-term care coverage. But, in general, the younger you are, the cheaper your insurance premiums. 
Insurance premiums rise by an average of 8% to 10% for each year you postpone buying coverage, according to Policygenius, which is why some experts advise addressing long-term care as soon as you can.
“You need to start thinking with one eye on the present and one eye on the future,” Barajas said. More