Inflation: Why There’s Reason to Remain Hopeful
Listen to Best in Wealth Podcast Episode 220
Are you feeling positive or negative about the world today? Have you been watching the financial news and feeling a sense of doom because everything they report is negative? Do you feel like inflation is out of control? I am here to tell you that we have reason to remain hopeful and optimistic. I share why in this episode of Best in Wealth.
Outline of This Episode
- [1:05] Do you believe most people are good?
- [2:36] Is inflation out of control?
- [5:47] The average inflation over the last 100 years
- [7:18] Market sentiment regarding inflation
- [9:13] We have reason to hope
- [11:43] Will you be a positive or negative investor?
Is inflation out of control?
Inflation is the primary reason the stock market took a nosedive in 2022. The recent banking crisis had put inflation on the back burner. Now, inflation is back at the forefront.
We have been hearing that inflation is not where we want it to be. A week and a half ago, the consumer price index showed that inflation was cooling in March—more than expected, actually.
In June of 2022, the consumer price index was 9.06%. Every single month since then, the CPI has gone down.
- Last August was 8.26%
- September was 7.75%
- December was 6.45%
- February was 6.04%
- March was 4.98%
What does the Fed want it to be? 2%. Unfortunately, it is still well above 2%. But we have made great strides.
The average inflation over the last 100 years
The average inflation rate over the last 100 years is right around 3%. We are currently 2% higher than the average. But we are seeing a trend. Every month, the reading has been lower. The problem is that we live in a society of instant gratification. Inflation is not going down quickly.
It took two years after the pandemic started for inflation to hit its peak. When the pandemic started, everything shut down. Nothing was made or shipped. Everything got clogged for months. But we have almost cut inflation in half. If you ask me, that is significant progress—but it is not what we are hearing in the news.
Market sentiment regarding inflation
The financial markets have proven strong. Yet no one seems to believe it. You would think that the decline in inflation and rally in stocks would sway the doomsayers. But recent data suggests the opposite. A JP Morgan Survey showed that 95% of respondents expect stocks to be lower by year-end.
A recent Bank of America Global Fund Manager survey shows that net allocation to stocks relative to bonds is at the lowest level since the great financial crisis of 2008. That means that the allocation is tilted toward bonds, which shows that fund managers do not think the stock market will do well.
Warren Buffet advocates for investing in the market when everyone is feeling doom and gloom. Americans are still spending money, seeing a better-than-expected economy, and a downtrend in inflation. Those that are calling for the stock market demise are running out of ammunition.
We have reason to be hopeful
Businesses are reporting their earnings for the first quarter. Many publicly traded companies are still reporting great earnings. That is not good news for the bears.
I cannot predict the stock market—but I do like the positive things we see in the market that are not being reported in the financial news. In 2023, earnings have been better than feared. So far, so good.
The war on inflation is not over. We have a long way to go. We are certainly concerned about the Fed going too far with rate hikes, possibly leading to a recession. That could happen.
But we need balance to the endless parade of negative headlines. There are good reasons to feel optimistic. Let’s shed light on the good news happening.
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The Best In Wealth Podcast is hosted by Scott Wellens. Scott Wellens is the principal at Fortress Planning Group. Fortress Planning Group is a registered investment advisory firm regulated by the Securities Act of Wisconsin in accordance and compliance with securities laws and regulations. Fortress Planning Group does not render or offer to render personalized investment or tax advice through the Best In Wealth Podcast. The information provided is for informational purposes only and does not constitute financial, tax, investment or legal advice.