December 3, 2021 glacierinvest

Inflation readings began to increase earlier this year, hitting their highest levels in 30 years last month. Rising inflation hasn’t really had much of an impact on asset prices yet. It isn’t a well understood phenomenon so beware of any dire predictions surrounding inflation.

Suffice it to say, inflation is currently trending higher and may do so for some time. Persistently elevated inflation may or may not have a negative impact on asset prices. Strong cases can be made for why inflation will continue to be elevated for a period while strong cases can be made why inflation will instead recede to levels consistent with the trend of the past 30 years. Nobody knows for sure.

What’s clear is that inflation trades have been hit and miss as the market digests inflation data and Fed speak. Interest rates haven’t really responded for which there doesn’t appear to be a valid explanation. The Fed appears to be more focused on inflation now given the chair’s testimony before Congress this week. Perhaps the tightening of monetary policy will put the kibosh on the rise in prices. Perhaps it won’t. Never fear, a well designed, implemented, and managed investment plan can effectively navigate an uncertain/elevated inflation scenario.