A signal of higher inflation?


The above chart shown the BLS Employment Cost Index, which includes wages and benefits. The ECI is up 2.7% y/y.

Is inflation finally in the cards? The problem is higher costs imply lower profits for business. The obvious response to lower profits is to cut costs. And this is eventually bad news for the economy and the markets.

The point is higher inflation is not good news because it causes profits to decline and the stock market strives on higher profits.

You will find more details on how these ideas apply to portfolio management are found in The Peter Dag Portfolio on www.peterdag.com
George Dagnino, PhD
The Peter Dag Portfolio
Since 1977
Author, Profiting in Bull and Bear Markets
No. 1 bond timer in the past 12 months. 

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