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Surprising Inflation News that Some Americans Recent data shows worrisome inflation activity. Markets are in denial, but Americans are starting to feel the squeeze. While this is a cause for concern, there’s a way to protect the spending power of your savings, and even use this strange activity to your advantage. Inflation Breaks Post-Recession Ceiling Two major price indexes used to calculate inflation are rising at their fastest rate since the last recession. Meanwhile, U.S. inflation just hit a four-year high. Jumping from 1.9% to 2.5% between January and February, the Consumer Price Index (CPI) experienced its fastest increase in over three years, according to the Bureau of Labor Statistics. Movement in the Institute for Supply and Management Price Index (ISM) was even more dramatic, leaping from 65.5% to 69% over the same period. That’s the sharpest increase since 2011. Aside from putting pressure on U.S. consumers and sapping their savings, this kind of spike in inflation activity has a high correlation with recession onset. The following chart overlays inflationary spikes with historic U.S. recessions:
Source: inflationdata.com As you can see, there’s a strong connection between economic distress and the kind of activity we’re witnessing now. Prepare for Fed to Hike Rates, Early and Often The Federal Reserve is well aware of the danger in today’s inflationary explosion, and it’s ready to react with faster, more aggressive rate hikes. Fed Chairwoman Janet Yellen is already hinting at another hike to come as early as next month. And economists from both Goldman Sachs and JPMorgan are raising their expectations for another hike in the near-term as well. But Fed officials must strike a delicate balance in their efforts to offset runaway inflation. Even with the best intentions, their actions could easily do more harm than good. Wolf Street reports:
How Some Will Use Exploding Inflation for Profit Finding a bright side in skyrocketing inflation is no easy task. As prices increase across the board, businesses and consumers alike will pay the price. And the risk of a painful economic constriction will be inevitable. However, amid all this risk, there’s an obvious opportunity that most won’t see. While financial markets historically fall into recession during times like these, there’s another class of investments known to do the polar opposite. As dollar prices increase for goods and services, they increase equally for real assets like precious metals. That’s the reason why gold and silver trend upward during inflation while everything else falls away. Newsmax covers Peter Schiff’s analysis:
If you’re interested in guarding the spending power of your savings – while potentially reaping healthy returns in the process – gold may be the best tool for the job. With this brief window of opportunity, now may be the perfect time to act.
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