{"id":12920,"date":"2022-05-23T16:27:17","date_gmt":"2022-05-23T22:27:17","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=12920"},"modified":"2022-05-23T16:27:17","modified_gmt":"2022-05-23T22:27:17","slug":"whats-the-true-inflation-rate","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=12920","title":{"rendered":"What’s the True Inflation Rate ?"},"content":{"rendered":"

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Bespoke put up a couple of good charts today showing TIPS breakevens beginning to fall and the 5-year breakeven with the conclusion being that “there is no evidence here whatsoever that the market is concerned about a long-term inflation spiral”.<\/p>\n

The SP 500 held the 3,800 level last week – a key Fibonacci retracement level for the technically-inclined investor – thus, with falling inflation expectations, the stock market could turn friendlier quickly.<\/p>\n

An interesting and somewhat contradictory story from Walmart’s earnings last week was that Walmart said food inflation was running double-digits. Half of Walmart’s annual revenue is grocery so don’t discount that lightly. That means half of Walmart’s expected 2023 revenue of $595 billion (or almost $300 billion) is grocery-driven making Walmart the largest grocer in America by a long-shot.<\/p>\n

With Ukraine being one of the world’s largest wheat exporters, it might take a year or two to replace that harvest and the grain price increases we’ve seen. Wheat is up 60% per this year per one source.<\/p>\n

In addition to the SP 500’s retracement level retest at 3,800, since the 10-year Treasury yield hasn’t made a new high since May 9th’s 3.17% high tick, if bond prices firm up and yields fall, that’s another positive for stocks.<\/p>\n

Finally, the dollar –\u00a0 as measured by the UUP – which has been exceptionally strong this year, has been weaker the last 3 days.<\/p>\n

Summary \/ conclusion: <\/strong><\/em>The Food & Energy components of the inflation indices could remain elevated for a while, but the breakevens are now indicating that inflation is expected to moderate and is expected to return to its traditionally-benign 2.2% annual rate.<\/p>\n

As of last Friday, May 20th, the SPY was down 17.71% year-to-date, while the Barclays Aggregate was down 9%, leaving a 60% \/ 40% balanced account down 14.23% YTD. That’s painful for a lot of investors particularly those in or nearing retirement.<\/p>\n

The final thought is that – given the last two weeks data here<\/a> and here<\/a> – SP 500 earnings haven’t weakened at all with the stock and bond market weakness. At least not yet.<\/p>\n

The TIPS and breakevens were worth noting. The true inflation rate is probably far lower than the headline numbers. Just keep that in mind.<\/p>\n

None of this is a prediction or forecast. As year-to-date returns have shown the stock and bond markets can be riskier than you think.<\/p>\n

Thanks for reading.<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Bespoke put up a couple of good charts today showing TIPS breakevens beginning to fall and the 5-year breakeven with…<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[190,282,259],"tags":[],"class_list":["post-12920","post","type-post","status-publish","format-standard","hentry","category-10-year-treasury-yield","category-60-40-portfolio","category-inflation"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12920","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=12920"}],"version-history":[{"count":5,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12920\/revisions"}],"predecessor-version":[{"id":12927,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/12920\/revisions\/12927"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=12920"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=12920"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=12920"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}