Some (me) people have been under the impression that the claims of inflation have been overblown. The December numbers suggest that I am wrong, even if the chicken-littles aren’t right. The numbers say core prices are up 5.5% year over year for December. Remember that this comes off an unnatural pricing environment during the pandemic, but these numbers are big enough to take seriously.
The Labor Department reported Wednesday that excluding volatile food and gas prices, so-called core prices surged 0.6% from November to December. Measured year over year, core prices jumped 5.5% in December, the fastest such increase since 1991.
https://apnews.com/article/consumer-prices-inflation-c1bfd93ed1719cf0135420f4fd0270f9
Supply chain problems are part of the cause, but the economy does have too much money sloshing about. The key is how much, and how fast should the Fed be raising interest rates. My primary concern is still that raising rates too fast could crush this unnatural economy still affected by Covid and its related problems. Unfortunately, there is no choice now. Runaway inflation will kill the economy just as dead as rising rates. The trick is still the supply chains. Prices won’t come down with less spending, unless the supply is there to react to lower spending.
Inflation Investments
I don’t recommend investing FOR inflation. I haven’t seen much evidence that investors win those bets over anything but a lucky short-term. However, there are some things you want to stay away from. Bond funds, and Bond ETFs are a bad place to be with rising rates. When you own individual bonds, the price is immaterial if you hold until maturity, but with bond funds, your redemption price will tumble due to rising rates and there is nothing you can do about it.
Author
By Brian Nelson – Brian is a former Certified Financial Planner and financial advisor. He writes for the Finance Gourmet and other financial publications. The material provided on this website is for informational use only and is not intended for financial or investment advice. At the time of publication, Mr. Nelson did not own any securities mentioned above, however, that may change at any time without notice. ArcticLlama, LLC, FinanceGourmet.com, and Brian Nelson, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.