May 2021 inflation at 5%
The latest inflation number was out last night, with the figure of 5% higher than the market’s expectations of 4.7%. While the Fed will like you to believe that this high inflationary figure is transitory, what if it is more persistent?
One key point in the 5% number that is not made known to many is that Food price increment is extremely marginal. That is rather surprising if we consider that supermarkets and many food retail outlets are grappling with higher input/raw material costs. Is this going to be a prelude to rising food costs in the future?
Check the video as we provide some ideas on what you can do to position size your portfolio in an inflationary environment.
2:00 mins May inflation numbers at 5%
3:00 mins Why isn’t CPI numbers even higher?
4:25 mins Is the Fed promoting financial stability
5:05 mins Changing of Fed policy
8:15 mins Yellen flip-flopping on interest rate stand?
11:15 mins Low negative real yield driving meme stocks?
12 mins Explaining Risk 101
15:15 mins What the Fed should be doing
16:40 mins What are the key asset classes that will perform the best in an inflationary environment
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Simple way to monitor — Just look at trend of 10-yr and 30-yr US treasuries.
Hundreds of thousands of people much MUCH smarter than you & I are on it 24/7 and putting real big money in harm’s way.
Bottomline is OK to allocate some portion of one’s liquid networth into inflation-protected assets, but don’t go overboard. 20% to 30% is fine.
Don’t forget, your own residential property also does well in inflationary periods.
PS: Large domineering consumer companies with strong pricing power are also good inflation long-term holdings that pays rising dividends over decades. Direct commodities & cyclical companies are obvious choices, but requires a large dose of contrarianess & some nimbleness.
Hi Sinkie,
Very sound advice there as usual.
But again… so many smart people out there all just taking the words of the Fed… no one was talking about inflation or that it is going to be a serious problem in early 2021, with Fed saying that Inflation is not going to be a problem…. I remembered having a conversion with a friend and my comment was that inflation is the no.1 risk to the equity market in 2021 and he brushed it away because the FED SAID IT WASN’T…. until it became one a couple of months later.
Its just like analysts taking the words of management like it is the holy gospel when frankly, management at times also has got no clue what might happen to their own operations.
The longer term treasury yields were already indicating rapid reflation by Oct/Nov 2020 with golden crosses.
Before that, yields had kept on rising rapidly from the lows of Jul to Oct.
Clearly enough people were concerned by potential inflationary forces to move the needle on the USD20 trillion treasury market way before the first vaccine was given emergency approval in Nov.
Currently the yields movement is saying let’s wait & see, maybe there’s need for revaluation.
Thanks for the great discussion as always.
Would you guys say there is any relation of this increasing CPI – to the dip it had last year (base effects)?
It seems that CPI Y-O-Y was slowly increasing till Feb 2020, then slowed down.
The rise was even slower, from the May and June 2020 numbers (to 0.3 and 0.1).
It started picking up again in July (0.6) and then remained around 1 for the rest of the year (average).
Maybe the next CPI numbers in July should moderate ? and if it does – Fed would be happy.
Personally, I am not their fan – the way Fed and analysts kept saying there was nothing wrong with the housing market and after it all went down, Bernanke still came out as “saviour”. What irony!
Hi raul,
thanks for stopping by. I believe the CPI figure for June will remain high and theoretically, it should moderate come July onwards when compared on a YoY basis. If it doesn’t then the Fed will have more explaining to do. This week will also be interesting as there will be a Fed meeting, so will be interested to see their current stance