As you are probably aware, a war is raging in Ukraine right now—Russia is exerting its dominance over its western neighbor. In response to this unprovoked action, the western world has united in imposing economic sanctions against Russia, decimating its economy. So, what does this mean for the US economy? And what does it mean for markets?
Learning & InsightsStay Up To Date With Economy
Sign Up For Our Newsletter
Receive the newest information right to your inbox
The stock market consists of all the publicly-traded companies in the country—this means that each publicly-traded company’s aggregate earnings, losses, challenges, and struggles are represented in the stock market. This last month, the stock market declined by almost 10% at one point. So, as investors, how are we to interpret that swing? And, how do we proceed in an environment like this?
The Christmas season is upon us! With inflation going strong and the Fed taking a backseat to natural economic forces, this Christmas season might feel more pinched than previous years. So, I recommend that shoppers do a little more to stretch their dollars so they can spread more cheer.
Recent polls indicate that most Americans believe the economy is doing poorly on account of persistent inflation. Some pundits have even begun to raise concerns over stagflation.
While there are elements of truth in their fears, I do not believe the sky is falling, nor do I believe that this is the last time we’ll be hearing inflation concerns over the next decade.
A lot is going on in the world right now, and there are many things to cover in this economic report, so hold on to your seats.
I have been reading many articles stating that the US is at risk of stagflation—a term used to describe a period with high inflation and stagnant growth. As someone who spends a lot of time studying economics and finance, I feel like these hit-piece articles fail to educate the reader properly, creating unnecessary fear and angst—my goal today is to fix that.
Inflation is often discussed but rarely understood. Inflation is simply a measurement of the increase of prices over time. To determine the official inflation rate, the government measures price changes in a basket of goods, including healthcare, housing, and education costs.
I believe that inflation will be high for the next 1-3 years based on the government’s current monetary policy.
For those who watch the news, you’ll hear the term Quantitative Easing (QE) thrown around now and then when they talk about the central bank’s monetary policy.
One of the most significant issues caused by a recession is illiquidity and the drying up of credit. In 2008, the central bank started experimenting with ways to create liquidity without creating significant inflation—their solution is Quantitative Easing (QE).
In my previous report, I said that I believed the Fed “will not touch interest rates for the foreseeable future, which means that 2021 will likely be a year of higher-than-usual inflation.”
Since that report, the Fed has made some announcements which make me think that my previous statement will be the understatement of the year!
In my last economic report, I contrasted the differences between the 2008 and 2020 recessions. As the current economy recovers from last year’s shutdowns, this difference is becoming more pronounced.
The immediate threat to us now isn’t unemployment or a recession—it is unchecked inflation and the hyper-charging of the economy.
We are on the precipice of a significant stimulus rollout that has the potential of upending the economy as we know it.
While it sounds like a kindness, if the government tacks on a $15/hour minimum wage to this economic oversaturation scenario, the cost of goods and inflation will be augmented significantly which will hurt the very people intended to be helped.
Learn About Other Topics
Are you interested on learning more about specific topics regarding your business? Click on the links below to learn more!