The most pressed economic issue over the last 2-3 months has not only been inflation fears, but in fact, inflation effects. Prices have surged, supply chains have been bottlenecked, and unemployment is still higher than it should be.
Recent CPI reports have shown clear data that inflation is in fact here. Both April and March are subject to this. CPI is the “Consumer Price Index.” It measures price changes in everyday goods, such as gas, grociers, services, etc.
- April 2021 CPI data up 4.2% from April 2020
- March 2021 CPI data up 2.6% from March 2020
The CPI report for May is this Thursday June 10th, investors will be watching. If inflation is foreign to you, check out an article we published a few weeks ago.
What worried me the most was the ignorance of the Federal Reserve and US Government. They saw inflation was here but took no action to combat it. Yes, it will work itself out over time, but some initative should have happened earlier.
- Unemployment benefits should’ve and still should be lowered, giving people incentive to return back to work.
- Interest rates rising or not is out of my realm of fully understanding. I won’t say they should have risen or not.
Nevertheless, Biden wants to combat supply chain issues by bringing more manufacturing into the US. He plans to do this through funding. I love the idea of America being the main plant for manufacturing & production, thus providing more jobs, which are needed in these times. However, Bidens future plans for the most part are only being carried out through massive funding, which I am weary of.
“The administration will establish a supply-chain disruptions task force to address near-term bottlenecks that can affect the economic recovery.”– Jenny Leonard, Bloomberg
- $50 billion in funding for semiconductor research and production in the US.
- $60 billion in funding for pharmaceutical production in the US.
- Agriculture funding to fight US food production slow downs.
Everything Is Subject To Inflation
Everything with a pricetag is affected by inflation. Real estate arguably less because of the land value. Stocks are especially subject because of how many companies have loans to pay off. So what should you do with your money…?
- Move some money into value stocks. If you have a bigger portfolio, I would move some money into giant companies that are “too big to fail.” My favorites are Microsoft ($MSFT) and Disney ($DIS). The little to no debt these companies have means less inflation worries for them. And their products will always be in demand since they’re top of the line. They have nothing to worry about.
- Move money into Gold or other commodities. Real, physical items are always in demand no matter what.
If your account is smaller it might not be worth putting money into these low-growth, low-risk value stocks. Just do want you can to increase your income and buy into your high-growth companies. Your portfolio number now will be insignificant compared to 10 years from now.
Does Inflation Scare Me Right Now?
After what I just said you might think so. I believe for the rest of the summer and even into some of the fall season the market has a high chance to remain flat, or trend slightly downward. There is nothing happening right now that could push the market to all time highs.
I still look at the bigger picture though. If the market dips, buy more. 10 years from now you’ll thank yourself for buying the dips.