Tag: Inflation

Shrinkflation & Jackson Hole

Today is a day that has become quietly (or not so quietly) famous in market and global economic circles. Today is the Friday of the annual Jackson Hole Economic Symposium held in the city of same name in Wyoming since 1978. The “summit” is organized by the Federal Reserve Bank of Kansas City and gathers central bankers, economists and policy makers from around the world. Friday at Jackson Hole has evolved to become an occasion when the US Federal Reserve Chairman serves up his or her keynote speech.

One key topic of the speech will be inflation: is inflation still around and how to contain it. Fed Chair Jerome Powell will probably not mention shrinkflation but he will mention inflation.

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The (Almost) Aftermath of Inflation

Inflation is not entirely gone yet. BUT – it could be worthwhile to try talking about it in the past tense and examine what enduring inflation has dealt – both negative and possibly positive – to spenders, savers and investors.

For one thing, inflation has gotten our attention! There is not one friend or client with whom I speak – those with money to burn and those with stricter budgets – who has not been shocked by food prices the past two and a half years. Are there any “silver linings” to this situation? What have been the worst consequences of inflation?

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Optimism & Caution Wrap Up 2024

Anything could have happened in 2024. The uncertainties were immense:

  • Outcome of the US Presidential election
  • Trajectory of US interest rates and inflation
  • At least two active wars with an element of US involvement
  • Trajectory of US stocks in this environment
  • The US Fed’s interest rate policy (did I say interest rates twice?)
  • Numerous other personal and world economic and social events.

The results – to date – in several of these categories have been positive or on-the-way-to-becoming-positive.

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Kids Driving Cars & Inflation

Most kids (over the age of 20) of my friends and clients have cars, but a handful of the most resourceful ones do not. OR, by necessity and affordability of car insurance, certain kids – in discussions with parents – have made the smart decision to forego owning a car until a future date. This situation may continue to happen especially in families, even wealthier families, with multiple kids under the age of 25.

Car insurance is expensive and becoming more so. The number of uninsured drivers (why is that even legal?) ramps up the cost of car insurance for all – even drivers with impeccable driving records. In addition, lingering inflation is contributing to exorbitant increases in auto insurance premiums.

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Interest Rate Changes Amidst Election Seasons

The Fed Chairman, Jerome Powell, and the US Federal Reserve are between a rock and a hard place.

There is far too much that can be said on the topics of where interest rates should be and the timing of when interest rates will be adjusted (most likely lower in the near future). To sum it up: politics, political opinions and political pundits – not to mention political candidates of both parties – have now entered the picture, clouding the views of regular people on the street even smarter investors attuned to the finer points of stock and bond markets.

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Interest Rates, The Fed & Market Highs

Today’s edition of TGIF 2 Minutes is worth a comparison to this past February’s archives – just 6 months ago – and was originally titled, “Interest Rates, The Fed & Gray Hair.” In today’s re-run, readers will learn that the US Federal Reserve lowering interest rates is not the only mechanism able to cause the stock market to go up. Sometimes markets go up due to other factors including momentum or continued consumer spending, as in the past 6 months.

Question asked in February 2024:

How soon might the US Fed lower rates and how fast might the markets keep going up or falter down?

A certain amount of gray hair (read: wisdom and experience) helps in understanding the current interest rate and US Federal Reserve environment. Why? Because economies do not move as fast as same-day or even same-month. And “gray hairs” know this.

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Lack of Clarity = Volatility

Markets prefer certainty. In times of relative economic certainty, market trends can be more defined and steadier. In times of economic uncertainty, markets react with volatility similar to the past 6 to 7 months. Two simple pieces of data:

  • The 10-year US Treasury yield was as high as 5.0% in late-October, then as low as 3.79% just after Christmas, then back up to 4.28% in March and very recently higher to 4.68% a mere few days ago. These levels – and the speed with which they have changed – represent fairly massive volatility based on historical 10-year US Treasury rates.
  • In the US stock markets, there has been similar volatility in both small-company indexes and the larger-company S&P 500 since last year with a noticeably weak 3Q 2023 and then all-time highs taking place just this past April 2024.

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Inflation vs. Interest Rates Stand-Off

If the “land the inflation airplane” graphic (originally pictured in October 2022) indicated a US Federal Reserve trying to “land” inflation, then the current graphic would look like a slowly unfolding aborted airplane landing.

To summarize, prices of a number of key consumer items are NOT coming down fast enough to lower inflation in a meaningful way – even if the media has convinced Americans that $5 or $7 for a dozen eggs is “a relief”.

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Teaching Inflation to Kids (& Adults)

From the archives of TGIF 2 Minutes – with updates, including perhaps why the US Federal Reserve is taking longer to start lowering interest rates…

“Mommy, Why are you buying our food at Walmart?”

…”Daddy, Why are we not eating my favorite fancy meals and brands of food?”

It is not quite Chef Boyardee and Ramen Noodles yet, but there is data reporting higher-end households shopping at lower-priced food stores (i.e. Walmart).* There is a lesson for kids and adults here. First a few more details.

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Interest Rates, The Fed & Gray Hair

Time again for the “soft landing” airplane drawing. As in, will there be a soft landing for the US economy or a hard landing? How soon might the US Fed lower rates and how fast might the markets keep going up or falter down?

A certain amount of gray hair (read: wisdom and experience) helps in understanding the current interest rate and US Federal Reserve environment. Why? Because economies do not move as fast as Amazon delivering a package same-day, or even same-month. And “gray hairs” know this.

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