Tag: inflation

Gold's Inflation Utility

Posted on by Gary Tanashian

Gold is okay, but not yet unique

There are times when gold is an okay inflation hedge while under-performing the likes of industrial metals, oil/energy, materials, etc. During those times, if you’re doggedly precious metals focused you should consider silver, which, as a hybrid precious metal/industrial commodity, has more pro-cyclical inflation utility than gold.

But as I have argued for much of the last year, if the inflated situation is working toward cyclical progress (as it is currently) then there is a world full of trades and investments out there to choose from, many of which are trouncing gold (which, as I have belabored for the better part of 2 decades now, is not about price but instead, value) in the inflated price casino.

The latest ISM Report on Business shows one negative among the important areas as employment declined. Now, before we get too excited about that gold-positive reading let’s also realize that manufacturing employment is still growing, new orders are briskly increasing, backlogs are up and customer inventories are down. In short, manufacturing continues to boom.

ism report on business

But being inflation-fueled, the economic recovery also has a ‘prices’ problem… and a materials/supplies problem (unless you’re one of the 2 or 3 people out there with a deep desire to own Acetone. There are potential Stagflationary elements to this situation, which would come forward if the economy starts to struggle due to inflation and the economic pressures it is building. Continue reading "Gold's Inflation Utility" →

Inflation Cools (For Now), Stagnation Awaits

Posted on by Gary Tanashian

To maintain the inflation, a cooling of inflation was needed

That is one of those Alice in Wonderland-like statements, like the one I’ve got tattooed on my left forearm: “Contrary-wise, what is it wouldn’t be and what it wouldn’t be it would, you see?”

To maintain inflationary policy, as per various talking Fed (egg) heads, the hysterical run-up in inflationary expectations and fears had to be tamped down. And so, Google users have indeed eased their neuroses right along with a recent tamping of inflationary hysteria.

Inflation

While inflation expectations ease but remain on-trend. Continue reading "Inflation Cools (For Now), Stagnation Awaits" →

How To Fight Inflation With ETFs

Posted on by Matt Thalman

Many market participants, including the Federal Reserve Board members, believe that inflation is coming. The questions at this point we would love to have answers to are, how bad will it be, will the Fed be able to control it, and how long will we experience a period of high inflation.

For years, the Federal Reserve has told us they wanted to see 2% or higher inflation, and for years we were below their benchmark goal. The Covid-19 Pandemic stimulus packages, combined with very low-interest rates and the low supply of material and goods due to Covid-19 shutdowns and the belief that demand would be weak following the shutdowns, we see prices from homes to cars to toys to obviously wood and other commodities sky-rocket.

So, it's easy to see that inflation is finally here, after years of the Fed trying to get it to move higher. But, now that it is here and it's clear the Fed had very little to do with it moving higher does anyone really have control of it? If no one does, then it could go much higher than most economists would like it to go, and it could stay that way for longer than most people would want it to? Continue reading "How To Fight Inflation With ETFs" →

Are You Ready For Some Inflation?

Posted on by George Yacik

The latest indicators of inflation are in, and they’re starting to look a little warm – bad news if you’re a bond investor. For March, the consumer and producer price indexes showed prices rising at their highest levels in years and well above the Federal Reserve’s 2% target.

The headline consumer price index jumped 2.6% on a year-on-year basis, the most since August 2018, and 0.6% since February, the biggest one-month jump since 2012. A good part of that rise was due to the steep rise in gasoline prices, so the so-called core CPI, which excludes food and energy prices, showed a more modest 1.6% YOY rise.

The producer price index, however, showed inflation running even hotter. Headline PPI jumped 4.2% YOY in March – its biggest spike in nearly 10 years – and a full 1.0% compared to the prior month. Excluding food and energy, the YOY increase was 3.1%, 0.6% on a monthly basis. Producer price increases often – but not always – turn into higher consumer prices, depending on whether or not manufacturers choose to, or are able to, pass along their higher costs to customers.

Whether these are momentary spikes or not, of course, remains to be seen. For his part, Fed chair Jerome Powell professes not to worry. Continue reading "Are You Ready For Some Inflation?" →

Stock Market: What Happens When Rates Rise?

Posted on by Noah Kiedrowski

The broader indices have been in a blistering bull market for a year straight, only accelerating from November 2020 into April 2021. The rally has been largely uninterrupted, with minor blips in September and October of 2020 before reaching new all-time highs after new all-time highs by mid-April. The initial rally was narrowly focused on technology and the stay-at-home economy stocks. With the improving vaccine prospects, November saw a sea change with broad market participation with value stocks breaking out with huge moves to the upside. To boot, Washington's massive stimulus is being priced into the markets via fiscal and monetary stimulus. All three major indices (S&P 500, Nasdaq, and Dow Jones) are at all-time highs and continue to break into uncharted territory in what seems like a daily basis.

Stocks are overbought and at extreme valuations, as measured by any historical metric (P/E ratio, Shiller P/E ratio, Buffet Indicator, Put/Call Ratio, and percentage of stocks above their 200-day moving average) or technical metric (Bollinger Bands and Relative Strength Index - RSI). Valuations are stretched across the board, with the major averages at all-time highs and far above pre-pandemic levels. A rise in rates due to inflation could be lurking in the shadows of this frothy market.

If/When Inflation Hits

If the Consumer Price Index (CPI) continues to push higher, The Federal Reserve may be compelled to entertain the idea of raising rates finally. Although interest rate risk disproportionally impacts fixed-income investments such as bonds and annuities, stocks will undoubtedly be impacted as well. This is especially true for highly leveraged companies such as tech and super-charged growth companies. Even the prospect of higher rates hit the Nasdaq in March for a sharp decline, albeit that decline was quickly erased. This is a case in point of how quickly the markets can turn negative with the hint of rising rates which may be exacerbated in an already frothy market. Continue reading "Stock Market: What Happens When Rates Rise?" →