{"id":9989,"date":"2021-11-18T16:49:09","date_gmt":"2021-11-18T16:49:09","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9989"},"modified":"2022-02-26T13:05:37","modified_gmt":"2022-02-26T13:05:37","slug":"is-inflation-transitory-or-here-to-stay","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/is-inflation-transitory-or-here-to-stay\/","title":{"rendered":"Is Inflation Transitory\u2014Or Here to Stay?"},"content":{"rendered":"\n<p><em>Kevin R. from Fairfield, CA asks<\/em>: Hi Mitch, I\u2019m\nconcerned about the October inflation numbers and the pattern of higher prices.\nThe \u201ctemporary\u201d inflation argument looks like it\u2019s wrong, and I\u2019m wondering if\nwe should be more worried about this. Thank you.<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thanks for writing, Kevin. I know your concern is shared\namong many readers, and it\u2019s probably the most-discussed worry in the financial\nmedia \u2013 all of which makes me bullish, as I will explain later. <\/p>\n\n\n\n<p>First, let\u2019s frame the inflation issue. In October, the\nConsumer Price Index (CPI) measure of inflation reached a 30-year high, posting\na 6.2% year-over-year increase and following five straight months where inflation\nhas topped 5%.<sup>1<\/sup><\/p>\n\n\n\n<p>An equally important, but far less acknowledged,\ngauge of inflation is producer prices, as measured by the producer-price index\n(PPI). A good way to understand the PPI is in relation to the CPI. The CPI\nmeasures the change in prices from the consumer\u2019s point of view, while the PPI\nmeasures the change in prices from the business\u2019s point of view. In a sign inflation\nis currently broad-based, the U.S. PPI also soared in October, recording its\nbiggest increase on record at 8.6%.<\/p>\n\n\n\n<p>_____________________________________________________________________________<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=website&amp;medium=blog&amp;term=mitchsmailbox_blog_2021_11_18&amp;content=volatility_guide\">Managing Your Investments Through Inflation<\/a><\/strong><\/p>\n\n\n\n<p>When\ninvestors are faced with inflation and volatility, they tend to chase negative\nheadlines. Questions may arise like: <em>Could volatility actually be an\nopportunity? What\u2019s the next step? <\/em><em><\/em><\/p>\n\n\n\n<p>The\nreal challenge is not in finding a way to eliminate volatility\u2014it is developing\na mental approach to dealing with it. Our guide, \u201cHelping You Manage Market\nVolatility,\u201d will provide you with insights and tips to do just that. Get\nanswers to questions like:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Market downturns can and will occur, but what should you do?<\/em><\/li><li><em>How can diversification help you manage volatility without compromising your returns?<\/em><\/li><li><em>When volatility is too much for you to handle, how can a money manager help?<\/em><\/li><li><em>Can volatility be an opportunity?<\/em><\/li><\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to get answers to the questions above, click on the link below to download this guide today!<br> \u00a0<br><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=website&amp;medium=blog&amp;term=mitchsmailbox_blog_2021_11_18&amp;content=volatility_guide\">Download Zacks Volatility Guide, \u201cHelping You Manage Market Volatility.\u201d<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=website&amp;medium=blog&amp;term=mitchsmailbox_blog_2021_11_18&amp;content=volatility_guide\">2<\/a><\/sup><\/strong><\/p>\n\n\n\n<p>_____________________________________________________________________________<\/p>\n\n\n\n<p>Even if we say these inflation readings are high because of\nthe base rate effects, i.e., comparing them to much lower 2020 inflation\nlevels, the month-over-month price increases have also been pretty firm this\nyear. Earlier in the year, we saw month-over-month inflation spikes due to base\neffects of rising hotel prices, airline tickets, and used cars, and later in\nthe year (currently), the increases have been tied to labor shortages, rising\nenergy prices, and snags in the global supply chain. <\/p>\n\n\n\n<p>Permanent, nefarious inflation happens when there is too\nmuch money chasing too few goods, which I\u2019m sure has many readers saying: <em>that\u2019s\nwhat we have now! <\/em>The difference, however, is that the U.S. and global\neconomy have the capacity to build-out supply, it is just currently trailing\nthe demand surge in the economy. In other words, turning consumer demand \u2018back\non\u2019 can happen instantaneously. Turning supply back on takes a bit more time,\nas businesses ramp up production and push towards being fully back online. \u201cToo\nfew goods\u201d is fixable, in other words, and I think it will be fixed in a few\nmonths\u2019 time. <\/p>\n\n\n\n<p>On the \u201ctoo much money\u201d side, while it is true that\ngovernment stimulus created a sizable increase in the M2 money stock, we have\nnot seen a sustained increase in the velocity of M2, which ultimately measures\nwhether the money is transacting in the economy (loans, spending, etc.). We\nknow a good portion of stimulus money was used to pay down debt and to save, and\nbank lending has not moved considerably higher over the past year. As you can\nsee in the chart below, the \u201ctoo much money\u201d side of the equation is\nmoderating.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/2_pic1-3-1024x395.png\" alt=\"\" class=\"wp-image-9993\"\/><figcaption> <strong><em>Source: Federal Reserve Bank of St. Louis<sup>3<\/sup><\/em><\/strong> <\/figcaption><\/figure>\n\n\n\n<p>Finally, as I\nalluded to at the outset of my response, the widespread concern and worry makes\nme even more bullish. The reason is simple: When everyone is fixated on an\nissue and it becomes widely discussed, its pricing power concurrently falls.\nThis is how \u201cwalls of worry\u201d get built. In other words, while we grow\nincreasingly concerned about inflation, the market has already priced in its\nactual impact. <\/p>\n\n\n\n<p>Let us\nhelp you steer through volatility and inflation instead of worrying about\nwhat\u2019s coming next. Our guide, <em>Helping You Manage Market Volatility<sup>3<\/sup>,<\/em>\nwill provide you with insights and tips to do just that. Get answers to\nquestions like:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><em>Market downturns can and will occur, but what should you do?<\/em><\/li><li><em>How can diversification help you manage volatility without compromising your returns?<\/em><\/li><li><em>When volatility is too much for you to handle, how can a money manager help?<\/em><\/li><li><em>Can volatility actually be an opportunity?<\/em><\/li><\/ul>\n\n\n\n<p>If you\nhave $500,000 or more to invest and want to get answers to the questions above,\nclick on the link below to download this guide today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Inflation has been described as &#8220;too much money chasing too few goods.&#8221; Mitch argues that the &#8220;too few goods&#8221; part will soon be fixed.<\/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":[66,71,1],"tags":[],"class_list":["post-9989","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9989","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=9989"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9989\/revisions"}],"predecessor-version":[{"id":10259,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9989\/revisions\/10259"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9989"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9989"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9989"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}