Latest Inflation Numbers and Discussion

[Koolau]

I would assume many of the ER members have significant equity assets.

Maybe people who are fortunate to have a generous pension with COLA wouldn't need to hold equities but otherwise?

Whatever has been happening in the market for the past year is probably not too different than what's been happening for the past 10 years, it not much longer.

Yeah, even with a modest (un-cola'd) pension, I depend on equities for growth. I don't see much different now than when I first started investing over 50 years ago. At least so far, inflation is the main thing I worry about - not the ups and downs of the stock market. YMMV

 

[audreyh1]

I think, based on 0.8% for unadjusted inflation in January, 6 month inflation August through January is 0.98, indicating annualized inflation of 1.96%. But that January bump up is pretty big compared to the preceding months, so we’ll have to see what the next months bring.

Certainly the Fed has more ammo to stay their course.

 

[JoeWras]

That medical care component is a burr in the saddle too. It was way too high a year ago, and now is too low. (Computational and methodology issues.)

 

[GenXguy]

Yeah, even with a modest (un-cola'd) pension, I depend on equities for growth. I don't see much different now than when I first started investing over 50 years ago. At least so far, inflation is the main thing I worry about - not the ups and downs of the stock market. YMMV

+1 This very high inflation has been a killer for me. It's deflated the purchasing power of my stash 20% or so, so I am having to work longer to try to close the gap a little.

 

[jldavid47]

I think, based on 0.8% for unadjusted inflation in January, 6 month inflation August through January is 0.98, indicating annualized inflation of 1.96%. But that January bump up is pretty big compared to the preceding months, so we’ll have to see what the next months bring.

Certainly the Fed has more ammo to stay their course.

They probably view the pause in the previous months as "transitory."

 

[audreyh1]

They probably view the pause in the previous months as "transitory."

Oh, I expect they do! And for good reason given how pernicious inflation can be and the history of challenges battling inflation.

But I get it re: their wishful thinking about the original sudden inflation jump.

 

[explanade]

Pundits were saying there are still too many jobs to bring down "services inflation" down appreciably.

 

[Montecfo]

Of course, the bulk of their raises last year have happened in the past 6 months. So a pause is certainly due given how far they have come and how quickly. It takes time for those hikes to begin impacting the market.

 

[ownyourfuture]

Ask the folks in japan how things are going in their stock market after the last 30 years, and most of the Eurozone countries too!

Not pretty.

 

[Koolau]

^^^^^^^^^^^^

What is the layman's explanation for this phenomenon? Why is US stock market more vibrant (in general?)

 

[Montecfo]

^^^^^^^^^^^^

What is the layman's explanation for this phenomenon? Why is US stock market more vibrant (in general?)

Better demographics than Japan. A freer market economy with lower energy costs and less drag from mandatory social programs than Europe.

But if course that seems to be changing, and we can expect a more sluggish economy as we become more like Europe, in my view.

 

[Koolau]

Better demographics than Japan. A freer market economy with lower energy costs and less drag from mandatory social programs than Europe.

But if course that seems to be changing, and we can expect a more sluggish economy as we become more like Europe, in my view.

Thanks. Maybe we can learn from Japan and Europe.-------------------

 

[Chuckanut]

Better demographics than Japan. A freer market economy with lower energy costs and less drag from mandatory social programs than Europe.



But if course that seems to be changing, and we can expect a more sluggish economy as we become more like Europe, in my view.

The USA also has a vibrant community of legal (and yes, some illegal) immigrants who work hard and add value to their own personal wealth and to the net wealth of the country. IMO, it is one of the significant advantages the USA had over countries that maintain a more consistent demographic.

 

[aja8888]

Thanks. Maybe we can learn from Japan and Europe.-------------------

I sure hope not. Both are train wrecks.

 

[Gumby]

I can learn from the failures of others as well as I can learn from their successes.

 

[MichaelB]

I can learn from the failures of others as well as I can learn from their successes.

US policymakers certainly have learned. The Japanese crisis was the result of a great property bubble, and it has taken decades for them to recover. The US policy response to a property bubble was much more painful but also much quicker, and the result is a far more dynamic US economy.

Japanese domestic demand has been stagnant for decades, their economic growth comes from exports. By contrast, the US has vibrant and robust aggregate demand. US policy measures are frequently criticized, but one cannot argue with the results.

 

[audreyh1]

It’s a big broad brush to declare all of Europe a train wreck. There are a bunch of different countries and they each have different economic outlooks.

 

[Montecfo]

Also the US has a culture of innovation. Japan, more of tweaking the innovations of others. Another piece of the stronger jobs engine.

 

[explanade]

It’s a big broad brush to declare all of Europe a train wreck. There are a bunch of different countries and they each have different economic outlooks.

And even in "basket case" countries in Southern Europe, the standard of living could be quite good.

As far as innovation engine, US definitely productizes research faster and better than most other countries. But are they more advanced in research? Depends on the field.

American companies hailed as innovators also hire a lot of foreign nationals, some educated in the US and some abroad. Not talking just about low-level H1-B1 visa holders.

 

[Montecfo]

The Producer Price Index (PPI) rose 0.7% in January compared to a decline of 0.2% in December. The headline figure dropped to 6.0%, compared to 6.5% in December.

Core PPI was up 0.6% in January compared to 0.2% in December. The annual figure fell to 4.5% compared to 4.7% in December.

It seems that the path to lower inflation will be a bumpy one!

 

[Koolau]

I sure hope not. Both are train wrecks.

Heh, heh, that's what I was hoping WE would learn from them! Don't do what they've been doing. (But, of course, we have our own issues.)

 

[Koolau]

It’s a big broad brush to declare all of Europe a train wreck. There are a bunch of different countries and they each have different economic outlooks.

True, But I think of Europe as a collection of "member states" NOT too dissimilar from OUR states within the USA. The EU treats its member nations a lot like the USA treats states (even worse in some cases.) US gummint laws and fiscal policy affect states - and affects them differently. Best EU example I know (personally, because I have a Polish friend) is EU setting quotas on Polish coal production - with the effect that Polish coal consumers have to purchase (until recently) Russian coal and now African and other-source coal at 5X the price of Russian coal. Doesn't make sense to me to put Polish miners out of w*rk and ship (more expensive) coal long distances to end users.

So in agregate, EU and its member states are a "train wreck" even though (for instance Germany) some member states are doing rather well. YMMV

 

[ShokWaveRider]

The Producer Price Index (PPI) rose 0.7% in January compared to a decline of 0.2% in December. The headline figure dropped to 6.0%, compared to 6.5% in December.

Core PPI was up 0.6% in January compared to 0.2% in December. The annual figure fell to 4.5% compared to 4.7% in December.

It seems that the path to lower inflation will be a bumpy one!

This most likely ensures at least another 25bps increase next month. ! will leave our dry powder in Schwab getting 4.63% for now I guess while waiting for the elusive 5% return on CDs 2 years or over.

 

[Montecfo]

This most likely ensures at least another 25bps increase next month. ! will leave our dry powder in Schwab getting 4.63% for now I guess while waiting for the elusive 5% return on CDs 2 years or over.

Yes. I expect the next two at minimum and per plan. Markets putting
the second one at 63% but a lot can happen I suppose.

 

[Freedom56]

St. Louis Fed’s Bullard can’t rule out a 50 basis point hike at March meeting. Sees policy rate at 5.25%-5.5%.

https://www.cnbc.com/video/2023/02/...t-a-50-basis-point-hike-at-march-meeting.html