Inflation in the U.S. has risen even faster than most economists expected, according to the latest reports. On Tuesday, the U.S. government announced that consumer prices climbed 5.4% year-over-year in June. This is the highest inflation rate in 13 years. The inflation rate in the U.S. is twice as high as expected. You should prepare for some action.
| | | | | | What You Should Know Now! |
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| Dear Reader,
Inflation in the U.S. has risen even faster than most economists expected, according to the latest reports.
On Tuesday, the U.S. government announced that consumer prices climbed 5.4% year-over-year in June. This is the highest inflation rate in 13 years. The inflation rate in the U.S. is twice as high as expected. You should prepare for some action.
Catch-up effects due to COVID-19 are largely responsible for this trend, according to economists. This is likely to be true for some sectors. Companies that offer services, for example, hairdressers, will try to stem losses by raising prices.
However, in my view, economists are too optimistic if they assume that the inflation rate will only be this high temporarily.
Prices have also climbed so quickly based on the ever-increasing money supply. If there is – significantly - more money available than would be expected given productivity, prices can typically move up faster.
This is exactly what is happening at the moment. The facts for you at a glance:
- Compared with the previous month of May, prices have risen by 0.9% overall within 30 days.
- Even excluding highly volatile products such as energy and food, prices rose 0.9% over May.
- Food alone was also 0.8% more expensive in one month.
- The energy index in the USA, which tracks various energy prices, climbed by 1.5%.
- Overall, inflation rates rose significantly for the fourth month in succession.
- Over the past six months, consumer prices have risen by 7.3% on a one-year basis.
- The Fed is currently pumping $120 billion a month into the economy. In particular, it buys government and corporate bonds. The money is regularly produced anew, thus increasing the money supply.
In my opinion, inflation will remain high. Therefore, you need to protect yourself.
Sooner or later, the inflation rate in Germany and the eurozone will also rise much more sharply. Price increases in the U.S. will devalue the dollar. Exporters in the U.S. will pass on the higher prices in their sales as far as possible. Thus, imports will probably become significantly more expensive via the U.S. inflation rate.
This concerns intermediate products or raw materials and consumer goods, which should also tend to influence the price level overall. Recently, an ECB (European Central Bank) director estimated that the eurozone's inflation rate would rise to 3% or more. I now echo that fear.
That is why you should prefer tangible assets for your investment that have proven their worth over decades. Dr. Gerd Kommer, for example, found in his scientific dissertation that equities outperform after deducting the inflation rate.
I always recommend that you include as much substance as possible in your portfolio - and companies that can themselves command higher prices.
We'll discuss a few trades like real estate investment trusts (REITs), consumer goods companies, and a variety of other inflation-proof businesses that you can consider very soon.
Enjoy your day, |
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| | | Dr. Gregor Bauer
Chief Analyst, European Markets |
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