Some investors believe that a recession warning that has been flashing on Wall Street for the past year may be sending a false signal and that the Federal Reserve will be able to tame inflation and still escape a deep downturn.
The signal — called the yield curve — has continued to reverberate in 2023 and is now sending its strongest warning since the early 1980s of a coming downturn. But despite the alarms becoming louder, the stock market has rallied and the economy has remained resilient, prompting some analysts and investors to rethink its predictive power. On Wednesday, the Consumer Price Index report showed a sharp decline in inflation last month, further buoying investor optimism and pushing stocks higher.
A lot of advertising is popping up these days urging folks to buy various commodities to fight inflation. Sounds like a dumb idea as commodities are likely already overpriced and at some point in the future will come crashing back down.
While I wish now that I had bought more energy stock years ago, I stayed away from adding more due to the high level of dividend payments. Paying taxes on dividends you reinvest sucks. It’s just money out of your pocket to the tax department every four months that your not seeing until you cash out. My original idea was to hedge against inflation but I feel like it just makes you more vulnerable to the ups and downs of one sector rather than cheaper index funds.
Inflation is a problem it kind of bites. The markets are down although nothing like what they’ve been up the past ten years. A slight dip today shouldn’t take away from long term thinking. It’s sucks to look at your portfolio and think your spinning wheels, with values only increasing slightly over the past year even though the total number of shares actually is getting a boost due to the down markets.
I am the kind of person who often over estimates costs and underestimates income and revenues. I tend to take a very conservative approach to life, I’m always worried about the worse case scenario maybe a bit too much. Catastrophizing.
Inflation is a bit of an annoyance now but my real concern is how much it is stealing from my future. Every dollar I spend now on more more expensive gas and food is a dollar that I don’t have for my future to grow and eventually buy the big things I want – land, equipment, animals. And the thing is I’m particularly hard hit by inflation because I drive a big jacked up truck and food because I have very basic tastes.
I see inflation every time go to the grocery store, gas up or wash my truck. Everything just seems like it’s getting more expensive. Even recycling at the transfer station is more these days. I make a lot more money than just a few years ago, but I don’t make that extra money to just blow it on today’s inflated prices. I want to save it for a better tomorrow.
Truth be told, my bimonthly savings and investments have been good over the past decade. Things have grown well, much faster than the rate of inflation. Some very well. But it’s getting harder to beat inflation and get good returns with prices going up so quickly. Years ago I bought some energy stocks but stopped adding to it after many years of lackluster growth and endless yearly taxable dividend payments. I probably also keep too much in ordinary “high–er” interest savings and CDs but I want to have something to fall back on should I lose my job, get seriously injured or need to junk my truck.
Lately I’ve cut out all but essential trips like visiting my elderly parents once a week and a one a week drive to the grocery store. In March I drove all of 116 miles, walking 178 miles and riding city buses 278 miles. I’ve had the heat off for several weeks, I avoid having the lights on at night and unplug everything when not in use.
I’ve done the peanut butter and jelly sandwiches and even tried lentils. I’m not a big fan of lentils – they’re such a yuppie food and kind of stinky too boot. I mean their not bad, and pretty cheap but by the time you add spices they’re not a big savings. I’d rather just do ordinary pasta. I rarely eat meat and while I’m a big fan of dairy, it just gets harder and harder to cut food expenses especially when even bulk packages at Walmart are increasing in prices.
Ultimately, I do have faith that my variety of investments will grow faster than inflation. Even as I grumble at the grocery store, I’m living within my means even if at times the budget is tight. Lately it hasn’t been quite as crunched although when I start traveling more come summer, costs will escalate. I’m a lot better off than many and if I stay the course, live frugally, a better tomorrow will come even if inflation poses challenges today.
The Federal Reserve ordered another big boost in interest rates on Wednesday, as questions bubble up about how much higher borrowing costs will have to go before stubborn inflation starts to come down.
The central bank raised its benchmark interest rate by 3/4 of a percentage point. The rate, which was near zero in March, has jumped 3.75 percentage points in the last eight months. That's the most aggressive string of rate hikes in decades, but so far it's done little to bring prices under control.
"Interest rates have risen at a whiplash-inducing speed, and we're not done yet," said Greg McBride, chief financial analyst at Bankrate. "It's going to take some time for inflation to come down from these lofty levels, even once we do start to see some improvement."
Annual inflation in September was 6.2%, according to the Fed's preferred yardstick — unchanged from the month before. The better known consumer price index shows prices rising even faster, at an annual rate of 8.2%.