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
Editor, The Peter Dag Portfolio
Since 1977
Author, Profiting in Bull and Bear Markets
No. 1 bond timer in the past 12 months. 

Disclaimer. The content on this site is provided as general information only and should not be taken as investment advice nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
STRATEGIC INVESTING FOR UNCERTAIN TIMES. Learn how to manage your portfolio risk and sleep comfortably. Improve the certainty of returns by taking advantage of business cycle trends. Learn to use simple hedging strategies to minimize the volatility of your portfolio and protect it from downside losses.