Is Inflation Peaking?
You see it in prices at the grocery store and the gas station. You feel it in your monthly budget. So why don’t the financial markets seem too concerned about inflation?
Remember, financial markets are considered “discounting mechanisms,” meaning they are looking six- to nine-months into the future. And by June 2022, the financial markets expect that inflation will lower than today.1
One lesser-known indicator helps support that forecast is called the Baltic Dry Index. It measures the cost of transporting raw materials, such as coal and steel. The index has been trending lower for several weeks, which in the past has suggested that prices may be more manageable in the months ahead.2
No indicator is fool-proof. That’s why the Baltic Dry Index is just one of the many indicators that our professionals follow when watching inflation. They also keep a close eye on the Fed, which is responsible for controlling inflation.3
With the economy improving, the Federal Reserve has indicated it will be tapering bond purchases this month. That may help with inflation. The Fed also has prepared the markets for higher interest rates in 2022. That, too, may help.4
For now, it’s important to understand that Inflation can influence interest rates, which often play a role in how a portfolio is constructed. We’re keenly focused on what’s next for inflation to determine if any portfolio changes are appropriate in the future.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, subject to revision without notice, and may not materialize.
1. Investopedia.com, 2021
2. CNBC.com, November 10, 2021
3. ClevelandFed.org, 2021
4. CNBC.com, November 3, 2021