Inflation

Inflation has not been tamed. In fact, it is reaccelerating. Energy prices are the main culprit, but the underlying rate has been above the Federal Reserve’s 2% target for the past 5 years. It isn’t just goods that are inflating, services have been especially persistent. Have you needed a plumber, electrician, or car mechanic recently? Then you know exactly what has been happening.

This past week, both the consumer price index and the producer price index were reported above expectations. Price increases were measured across a wide variety of categories. Blaming it all on oil just doesn’t wash. The stock and bond markets are catching on. Interest rates are rising, and stock investors have gravitated to areas that will not be affected.

The AI, artificial intelligence, build-out is attracting investor interest because the capital spending seems assured. Therefore, firms engaged in this are more likely to benefit. The rest of the stock market has actually been declining. Here, because of higher interest rates, there are fears that prospects are less sure. So, once again, the stock market advance has narrowed. This is not a good sign.

The Lonely Bull and his partners are expecting interest rates to continue to increase and the stock market to experience greater volatility. We are managing portfolios accordingly. Remember, volatility cuts both ways. It provides greater opportunity as well as risk. The important thing will be to maintain a longer-term perspective. Stay steady my friends.

-The Lonely Bull