by Glenn Busch
April 13, 2011
Inflation – Headline inflation (which includes food and energy) has already perked up, while core inflation (excluding food and energy) remains at very low levels. The Fed views headline inflation as transitory as price movements in food and energy are historically volatile, and therefore difficult predictors of real monetary inflation (i.e. too much money chasing too few goods). While it doesn’t appear to be an immediate threat, a strong up-tick in core inflation could prove to be very harmful to future growth.
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by Glenn Busch
December 15, 2010
While still in line with the disinflation that the Federal Reserve is worried about, a couple key line items are still increasing on a twelve month basis. The three items that need to be watched in relation to U.S. consumer health is energy, food, and medical costs.
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Effects of Inflation on Stock Market Returns
by Glenn Busch June 10, 2011A low and stable inflationary environment is ideal for equity markets. Interest rates remain low and there is less fear of rising interest rates. P/E multiples expand as investors seek marginal returns higher than bonds. Above average equity multiples are easily supported like those we saw in the late 1990s and the years before the 2008 financial crisis. The problem in a low and stable inflationary environment is that it rarely stays here for very long. This is the environment we find ourselves in today.