With inflation globally running at almost 40-year highs, and the Fed having lost control of the narrative on inflation, one wonders what comes next, and what investors can do about it. Just to remind the readers who might have had their heads buried in sand for the last year and haven’t visited a grocery store or filled their tank: inflation in the US as measured by the CPI (consumer price index) came in at 7.5%, and PPI (producer price index finished goods, non-seasonally adjusted) just came in at 12.2% (Source BLS). It’s the same story around the world. Inflation is raging, while the central banks are still buying bonds and pumping more money into the system. Nominal bond yields in the US are still under 3%, and real yields in intermediate maturities (as measured by TIPS) are negative. Yes, if we own these bonds we are paying 5% a year of purchasing power or so for the privilege. Time to take our heads out of the sand!
The full note on this important topic can be downloaded at this link: LTA Thinking- Ostriching Central Banks- And What Investors Can Do To Get Ahead of the Stampede of the Big Birds