INFLATION: We Have a Problem

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You can see the disastrous effects of reverse compounding four percent over several years (it’s more than four percent in the real world). This is a time to keep what you make, save til’ it hurts, and work for as long as you can. And only when you have enough money to retire on—with the comfort you deserve—you might want to reconsider.

Inflation can eat up your returns, and it’s still running hot in the Biden era. Gwynn Guilford reports in The Wall Street Journal:

Inflation fell in May to around half last year’s peak but remained elevated, showing Federal Reserve officials made progress in cooling price pressures but could have more work to do.

The consumer-price index rose 4% last month from a year earlier, the Labor Department said Tuesday, well below the recent peak of 9.1% last June and down from April’s 4.9% increase.

Fed officials meeting Tuesday and Wednesday are debating whether to pause interest-rate increases after raising them aggressively from low levels to slow economic growth and tame inflation, which they would like to see at 2%. The Fed in May raised its benchmark interest rate to the current range between 5% and 5.25%, the highest level in 16 years.

If the Fed holds rates steady this week, it could consider whether to raise rates at their subsequent meeting in July or a meeting later in the year.

“Directional progress should not be confused with mission accomplished,” said Sarah House, senior economist at Wells Fargo.

Stocks rose Tuesday with the S&P 500, Dow Jones Industrial Average and Nasdaq all advancing. Treasury yields ticked up, with the 10-year note settling at its highest level since March.

So-called core consumer prices, which exclude volatile food and energy categories, climbed 5.3% in May from a year earlier, down from 5.5% in April. Economists see core prices as a better predictor of future inflation.

Action Line: When you’re ready, I’m here.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.

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