I do not understand why the markets get excited because core inflation was up only 0.1%.In the last three months food and beverages rose 7.4% (at annual rate), transportation jumped 8.3%, and medical care costs soared 5.6%.
In other words: if we do not get sick, do not move from the house, and do not eat and drink inflation is under control.
I am confused. Is there an angle I do not understand?
The foreign exchange markets do not seem to agree with the rosy story because the Euro continues to rise against the dollar and gold is strong.
Keep in mind higher inflation reduces our purchasing power and forces interest rates to rise. The end result is a sharp slowdown (see above chart; click on graphs to enlarge).
Eventually this is good news for bonds (but only when inflation declines because of the sharp slowdown).
And stocks? You can guess the outcome.
More on https://www.peterdag.com/
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
1 comment:
The spin on these numbers is unbelievable. The retail sales headlines look rosy until you read the not-even-fine print: higher prices not volume drove it. (As you point out).
I find it interesting that CSX is rallying because they have 'pricing power'. Their volumes are falling. Pricing power and falling volume is not a scenario that has any longevity.
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