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Something More is a Financial Talk Show. We call the program "Something More" so that we can talk about not only those important dollar and cents issues, but also the quality of life issues that make the money matters matter.  Not only do we speak about investment and planning concerns, but we often invite guests for interview. 

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  2. AMR, Economic & Market Update; Inflation

AMR, Economic & Market Update; Inflation

Jul 26, 2021

Chris and Brian discuss performance for the first half of 2021 and the factors driving the market.

The S&P average annual returns have been at 14% for the prior decade and the all-stock index has surpassed 14% over the last six months.

Covid continues to be a concern, with the Delta variant 3x more contagious. However, we are getting near herd immunity with fewer hospitalizations and death.

The Federal Reserve and AMR use Core PCE to measure long-term inflation. (News outlets often us CPI to measure inflation, which includes energy and food and is more volatile.) This measure has been running at 2.45% annualized rate of return over the last 2 years. Last quarter it ran at 3.39%, which is higher than targeted but not absurd. Inflation could be transient and settle at slightly higher than historic norms.

  • Housing prices have been high with 10-20% gains. This will probably moderate from where it’s been due to low supply and high demand during Covid. Housing prices in 2021 are on par with where were 2018.
  • Cost of lumber is normalizing, where it was extremely high due to the delay in supply during Covid.
  • Unemployment continues to be high with 400k unemployment claims last and 2M workers 25-54of age  still not working. Unemployment benefits, lack of childcare, and fear of virus contribute to the 9M job openings.
  • Wage growth has been stagnate around 3% - low skilled workers are getting raises which will increase inflation modestly but nothing to be concerned about.
  • Millennials are coming of age and buying houses and starting families. This could lead to a little bit of inflation but nothing scary high.

More savings and pent-up demand is now leading to spending. This with the demographic considerations bodes well for stocks.

Jeff Tomaneng discusses the CNBE article– 'Inflation is the Silent Killer ', where he was recently quoted. In the article, Jeff and others discuss how many retirees are feeling the sting of inflation. 

Brian and Chris discuss if inflation protected securities make sense.  if inflation is transient, as the Fed is indicating,  demand for these investments will erode and price will decline.