Our goal for Investment Perspectives is for it to be one of the ways that we communicate our thinking (past and present) to clients and the general public. We believe that investing is an iterative process and we know of no better way to test our own thinking than to share it with others. We encourage readers to send us their thoughts or questions.
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What to Make of Rising Inflation Expectations?
Amidst the backdrop of sustained Federal interest-rate suppression and trillions of dollars in fiscal stimulus, it comes as a surprise to few that inflation has become a pervasive topic for investors. For those born in 1960 or earlier, you likely remember, with not so fond memories, the decade of the 1970s, which saw some of the highest rates of inflation on record coupled with weak economic growth. The average inflation rate for the decade was 6.8%, nearly triple the rate of the previous two decades; maintaining the purchasing power of your income was a very real concern. For those born after 1960, it is unlikely you have experienced the wealth destroying effects of inflation firsthand. The rising inflation expectations today are preceded by several decades of economic growth and stable prices; it is easy to see why the word “inflation” has this urban legend-like quality, engrained in the brains of so many. Investors have feared the return of inflation for nearly half a century but to no avail. So why have expectations suddenly changed so dramatically?
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