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The Markets As New York Fashion Week ended, inflation strutted its stuff. Ever since the Federal Reserve began raising the Fed funds rate in 2015, analysts have been anticipating higher inflation. The fact that price increases remained relatively small was a perplexing mystery. Then, last week, inflation increased faster than expected. The Bureau of Labor Statistics reported the Consumer Price Index (CPI), one measure of inflation, rose 0.5 percent in January. As you might expect, the cost of some items rose faster than others. For example, energy costs rose by 3.0 percent, while the cost of food was up 0.2 percent. In total, during the last 12 months, the all-items index rose 2.1 percent. When food and energy are excluded, the increase was 1.8 percent. Barron’s reported, “Leaving aside the month-to-month squiggles, the real story is that inflation is closing in on the Fed’s 2 percent target…And even if January’s rise in the CPI was overstated, a real cyclical uptrend is under way…Deflation in the prices of consumer goods we like to buy is ending; the rate of increase in the cost of things we have to buy either is rising, as for food and energy, or remains high, as for services or rent.” Higher prices are one side of the inflation coin; the other side is higher interest rates. Inflation is one of the data points the Federal Reserve considers when determining how well the economy is performing. Rising inflation signals a robust economy. That may encourage the Fed to raise rates more aggressively during 2018 to prevent the economy from overheating. The possibility of more concerted Fed tightening helped bump U.S. treasury rates higher last week. Higher interest rates could become a boon for income-oriented investors. For years, persistently low rates have caused some investors to accept higher risk than they might have otherwise. As interest rates move higher, there may be opportunities to reduce portfolio risk and still generate attractive levels of income. Despite inflation-inspired volatility mid-week, stock markets around the world moved higher. In the United States, major indices once again moved into positive territory for 2018. Ridiculous? Silly? Strange? Some ideas may seem that way. Albert Einstein is famous for having said, “If at first the idea is not absurd, then there is no hope for it.” In recent weeks, Fast Company has reported on some “world-changing ideas,” including:
What do you think? Do they pass the absurdity test? Or are these ideas too tame? Weekly Focus – Think About It “The function of education is to teach one to think intensively and to think critically. Intelligence plus character – that is the goal of true education.” --Martin Luther King, Jr., American Baptist minister and activist Sources: https://www.cnbc.com/2018/02/14/us-consumer-price-index-jan-2018.html http://fortune.com/2017/12/28/us-inflation-economists-2017/ https://www.bls.gov/news.release/cpi.nr0.htm https://www.barrons.com/articles/the-ghost-of-inflation-reappears-1518837372 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-20-18_Barrons-The_Ghost_of_Inflation_Reappears-Footnote_4.pdf) https://finance.yahoo.com/quote/%5ETNX/history?p=%5ETNX https://www.globalbankingandfinance.com/tighter-monetary-policy-will-put-brake-on-corporate-profits/ http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Click on U.S. & Intl Recaps, “Equities regain composure,” scroll down to “Global Stock Market Recap” chart) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-20-18_Barrons-Global_Stock_Market_Recap-Footnote_7.pdf) https://wordplay.blogs.nytimes.com/2013/12/10/whats-taken-home/ https://www.fastcompany.com/section/world-changing-ideas https://www.fastcompany.com/40528502/this-school-focuses-on-teaching-students-happiness-not-math http://www.levyinstitute.org/pubs/rpr_2_6.pdf (Pages 6 and 50) https://www.fastcompany.com/40525347/timberland-is-helping-rebuild-haitis-cotton-industry https://www.brainyquote.com/quotes/martin_luther_king_jr_402936 * These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice. * This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer. * Weekly Market Commentaries are sent as mass email communications by the designated email address weekly_update@guidancewealth.com. * Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Stock investing involves risk including loss of principal. * Consult your financial professional before making any investment decision. * To unsubscribe from the Guidance Wealth Newsletter please reply to this e-mail with "Unsubscribe" in the subject line. WMC021918. Comments are closed.
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