Some inflation is expected as the US economy reopens and consumers begin spending after a widespread decline during the VirusCasedemic, the sudden increase in prices has many concerned.
The consumer price index rose by 0.8% in April for a 4.2% increase in total over the past yr, according to the US Labor Department, the fastest annual rate since Y 2008.
And the Fed is having a difficult time convincing financial markets about its stance on inflation, which involves letting prices rise above the target level to make up for yrs of low inflation that has hurt wage growth and the Fed’s ability to raise interest rates.
Chairman Powell said it will not raise interest rates until inflation is set to make up for shortfalls and the US has reached maximum employment, which likely will not happen for another yr or more.
Savvy analysts know that real asset inflation, the metric that really matters for the economy is here. It is true that real asset inflation stimulates certain kinds of economic activity.
Helicopter money settling gently into The People’s bank accounts stimulates economic activity too.
Asset price inflation pumps up the net worth of The People who live in the net worth economy relative to the large group of The People who live in the paycheck economy, which leads to conflict and big tax hikes.
Plus, in the long-run, real asset inflation erodes capital formation by pushing investors into inflation hedges and tax shelters, as anyone who was awake and aware during the late-1970’s can attest. It also increases the risk that we will wake up 1 day surprised to see that the next credit crisis has already started, as we have done many times in the past.
Tuesday, the benchmark US stock market indexes finished at: DJIA -267.13 to 34060.66, NAS Comp -75.41 to 13303.67, S&P 500 -35.46 to 4127.83, the Russell 2000 declined 0.7%.
Volume: Trade on the NYSE came in at 928-M/shares exchanged.
HeffX-LTN’s overall technical analysis of the major US stock market indexes is mid to long term Bullish in here.
- Russell 2000 +12.0% YTD
- DJIA +11.3% YTD
- S&P 500 +9.9% YTD
- NAS Comp +3.2% YTD
Looking Ahead: Investors will receive the weekly MBA Mortgage Applications Index Wednesday.
Have a healthy day, Keep the Faith!