{"id":9614,"date":"2021-05-27T15:52:23","date_gmt":"2021-05-27T15:52:23","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9614"},"modified":"2022-02-26T13:05:52","modified_gmt":"2022-02-26T13:05:52","slug":"is-inflation-a-short-term-or-longer-term-issue","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/is-inflation-a-short-term-or-longer-term-issue\/","title":{"rendered":"Is Inflation a Short-Term or Longer-Term Issue?"},"content":{"rendered":"\n<p><em>Michaela A. from St.\nGeorge, UT asks: <\/em>Hi Mitch, I\u2019ve been hearing and reading so many different\ntakes on inflation. The Federal Reserve says it\u2019s \u201ctransitory,\u201d but everyone\nelse seems to think it\u2019s a huge deal. I\u2019m trying to make heads or tails of it.\nWhat are your thoughts?<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thanks for\nyour candid question, Michaela. I\u2019ll return the favor and get right to the\npoint. <\/p>\n\n\n\n<p>The inflation\nquestion, in my view, should not be framed as whether the U.S. economy will\nexperience inflation in 2021 and beyond. Inflation is already here. <\/p>\n\n\n\n<p>The question\nis whether inflation will be short-term\u2014as in, an issue for the next few\nquarters\u2014or whether inflation will become a persistent, longer-term issue,\nwhich would necessitate drastic monetary tightening from the Federal Reserve. I\nthink the answer is probably somewhere in between. <\/p>\n\n\n\n<p>_________________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-use-volatility-to-your-advantage?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_05_27&amp;content=volatility_can_be_good_guide\">Learn How You Can Benefit From a Volatile Market!<\/a><\/strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-use-volatility-to-your-advantage?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_05_27&amp;content=volatility_can_be_good_guide\"><br><\/a> &nbsp;<br>When the market experiences periods of turbulence, the bad news that media and headlines bring may cause you to feel very unpleasant. Remember that this feeling is completely normal for investors. Sudden ups and downs of the market can be very challenging to manage, but even in the most uncertain times, there are positive aspects that stem from a <em>rollercoaster market. <\/em><br> &nbsp;<br>If you have $500,000 or more to invest, get our free guide, <em>\u201cUsing Market Volatility to Your Advantage,\u201d<\/em> and learn our insights, based on decades of experience, about how a volatile market may be able to actually help investors refine their strategies and potentially generate solid returns over time.<br> &nbsp;<br> You\u2019ll get our ideas on:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>How market volatility can \u201cshake up\u201d complacent investors<\/li><li>Potential bargains that may be uncovered through turbulence<\/li><li>Why volatility may help prevent overheating and market \u201cbubbles\u201d<\/li><li>What history shows us about opportunities for steady investors in turbulent markets<\/li><li>Plus, more ways you may be able to benefit from a volatile market<\/li><\/ul>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-use-volatility-to-your-advantage?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_05_27&amp;content=volatility_can_be_good_guide\">Download Our Guide, \u201cUsing Market Volatility to Your Advantage\u201d<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-use-volatility-to-your-advantage?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_05_27&amp;content=volatility_can_be_good_guide\">1<\/a><\/sup><\/strong><\/p>\n\n\n\n<p>_________________________________________________________________________<\/p>\n\n\n\n<p>People often forget, but the 10-year U.S. Treasury bond is arguably\none of the best tools for forecasting inflation. If the 10-year U.S. Treasury\nbond yield rises persistently and substantially, it is usually a sign that the\nmarket is expecting higher inflation in the future. After all, investors who\nexpect higher inflation in the future will demand a higher yield on fixed\nincome today. As you can see in the chart of the 10-year U.S. Treasury bond\nyield, rates have moved higher in 2021, but not alarmingly so. Rates are still\nvery low historically.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/7_pic1-2-1024x395.png\" alt=\"\" class=\"wp-image-9615\"\/><figcaption> <strong><em>Source: Federal Reserve Bank of St. Louis2<\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p>As for the Federal Reserve, there is another way forward\nwhen it comes to keeping inflation under control: slowly and methodically start\nto tighten monetary policy. In my view, current fears in the market are that\nthe Fed will be forced to take drastic measures to rein in inflation, but I do\nnot think the outcome will be quite so dramatic. In the most recent Fed\nminutes, for example, most of the committee\u2019s language seemed to indicate that\ninflation was being watched closely, but that the risk was balanced with the\nprospect of actual economic growth. To the extent that economic growth drives\ninflation, the Fed can have more leeway to \u201ctaper\u201d versus outright tighten. <\/p>\n\n\n\n<p>The U.S. economy still has plenty of runway to return to pre-pandemic\nstrength, and there is plenty of spare capacity and slack in the labor market\nto keep prices from moving too high too quickly, in my view. Inflation could\nvery well become an economic issue down the road, I just don\u2019t think it will be\na major concern in 2021. <\/p>\n\n\n\n<p>The path to reaching your long-term financial goals is a\nprocess. There are going to be many\nunforeseen circumstances in the market that may cause you to worry \u2013 one being\nhigh inflation. In turbulent and uncertain times, investors still have an\nadvantage over sudden market changes. <\/p>\n\n\n\n<p>To give\ninsight into some of these positives, I am offering all readers our guide\n\u201cUsing Market Volatility to Your Advantage\u201d<sup>3<\/sup>. This guide&nbsp;can\nhelp you learn about our insights, based on decades of experience, about how a\nvolatile market may be able to actually help investors refine their strategies\nand potentially generate solid returns over time.<br>\n&nbsp;<br>\nYou\u2019ll get our ideas on:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>How market volatility can \u201cshake up\u201d complacent investors<\/li><li>Potential bargains that may be uncovered through turbulence<\/li><li>Why volatility may help prevent overheating and market \u201cbubbles\u201d<\/li><li>What history shows us about opportunities for steady investors in turbulent markets<\/li><li>Plus, more ways you may be able to benefit from a volatile market<\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest, download this free guide today by clicking on the link below. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Inflation is becoming a hot topic, but how important an issue is it for investors?<\/p>\n","protected":false},"author":3,"featured_media":7436,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-9614","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9614","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9614"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9614\/revisions"}],"predecessor-version":[{"id":10390,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9614\/revisions\/10390"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9614"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9614"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9614"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}