Inflation is worrying investors. Every new data point seems to be heightening their anxiety. Oil and other commodities are raging higher. The rate of wage increases is also climbing, but the most important variable the Fed is watching is about to move higher. Housing and/or home ownership is one of the most important components of the U.S. economy. However, housing prices per se are not included in the Consumer Price Index (CPI). Instead, the CPI measures the cost of shelter, which is broken down between actual rents paid and the Owners’ Equivalent Rent or OER. OER is the amount of…
Insights & Advice
Tag: CPI
Markets snap out of their downtrend
It appears that we have established a range in the stock market over the last few weeks. The bears have not seen their worst predictions come true. My hope is that we leave this month where we entered it. September 2021 was treacherous. Bears were calling for a 10% correction at a minimum. Bulls, already on the back foot after witnessing a 5% pullback in the indexes, insisted we had seen the lows. Since then, we had been bouncing back and forth in a range. This week, however, appears to be a game changer. We have not re-tested the lows…
Things are heating up
“Don’t touch me; I’m too hot! Y tu lo sabes!” —Usnavi, In the Heights Ouch! Inflation is heating up enough to burn my fingers. Some quick numbers, and then I’ll try to avoid any more percentages. (Emphasis on “try.”) The Labor Department reported that inflation in June 2021, as measured by the Consumer Price index (CPI), increased 5.4 percent, year-over-year. That is the highest 12-month rate since August 2008. For context, commodity prices were booming then; oil prices hit a record $150 per barrel. The so-called “core rate” was up 4.5 percent during that same time. The core rate excludes items…
Inflation is running “hot”
May’s Consumer Price Index (CPI) jumped the most since 2009. That follows a similar gain over the past three months that has brought the total increase to 6.9% on an annualized pace. That is the largest gain in 13 years. Excluding the notoriously volatile food and energy components, however, the “core” CPI rose by 0.7%, which was still larger than the forecast of 0.5%. Readers might scratch their head when looking at those numbers, since excluding food and energy makes little sense to us, who are faced with weekly rises in both commodities. The difference is that the price of…
Inflation fears weigh on investors
Most stocks took it on the chin earlier this week. Technology shares lead the rout, but it didn’t take long before just about everything else followed tech lower. By the end of the week, it was as if nothing had happened. That’s called “chop.” Get used to it. The Consumer Price Index (CPI), which investors use to gauge future inflation, took the lion’s share of the blame for the downdraft in equities. Economists had warned that we should expect a higher monthly reading (0.2%) for April, but the data came in at 0.8%. That computes to a 4.2% price gain…
The Reflation Trade
Over the past six months, an increasing number of investors have come to believe that a rise in the inflation rate is inevitable. That appears to be a sound bet from where I sit, even though the present data doesn’t support that wager. The argument for increased inflation centers around money. The world is awash in the stuff. Central banks have been printing money for years to stimulate their economies. Last year’s pandemic only opened the monetary flood gates even further. And the trend is not over. During the next few months, here in the U.S., the Biden Administration is…