How to tame inflation? We are experiencing inflation and if you are under age 55 this is something you have never experienced before. Not since the 80’s have we battled a spike in inflation like this, so the uncertainty and fear around the affordability of goods and services is warranted. There is a playbook for taming inflation. Notable Number 3 in this week’s Weekly Market Review details how the Federal Reserve tackled inflation 42 years ago. I suspect Chairman Powell and our current Federal Reserve Board of Governors will be aggressive, but not nearly as aggressive with rate hikes as the board was 42 years ago.
My personal opinion is that inflation problems will improve in the near to mid-term. As people around the world return to normal work schedules and supply chains piece back together, this should allow the supply of goods to normalize and prices to come down. Recently in the US, there were almost 3 jobs available for every person seeking work. This imbalance has created a remarkable increase in wages. As labor markets normalize with the number of people seeking employment more closely matching the number of jobs available, the rapid increase in wages will slow, allowing the jump in prices for services to slow also.
On the other side of the coin, I was in a meeting this week with a client who is a grain farmer and we were discussing inflation and the quick increase in commodity prices. He shared with me that he and other farmers are contracting/selling crops that have yet to be even grown, at these higher prices. It remains to be seen, but that leads one to think that the costs at the grocery store may stay elevated for years instead of months.
It was a welcomed sight last week to see the equity markets rebound sharply from what felt like an eternity of prior negative weeks. The earnings and balance sheets of most publicly traded companies are strong and that is what pushes the market forward in the long-term.
As the tax deadline of 4/18 approaches our team is again busy helping clients make last minute 2021 IRA and Roth IRA contributions. We are ready to help you also if you are trying to squeeze in contributions before the deadline. Please just don’t wait until the very last minute!
As always, we hope you find the Weekly Market Review both informative and interesting. Have a good week!
Trevor N. Coe, CFP®
TREVOR'S WEEKLY MARKET REVIEW
March 25, 2022|