Is This "Transitory"?

In June, inflation continued its rapid ascend, rising at its fastest pace in nearly 13 years amid an ongoing increase in the cost of used vehicles, food and energy.

The consumer price index rose by 5.4% from a year ago while economists surveyed by Dow Jones had been expecting a gain of 5%. The Core CPI (which strips out changes in food and energy prices) rose 4.5%, which is the sharpest rise since September 1991 and is significantly higher than the estimate of 3.8%.

Supply chain bottlenecks, labour shortages and extraordinarily high demand as the Covid-19 pandemic eases have pushed inflation higher. Much of the price pressures have come from sectors influenced particularly by the shutdown: used car prices, air fares and transportation costs.

"The economy still looks set to achieve very complete recovery in the months ahead, with plenty of excess demand to sustain stronger inflation." David Kelly for JPMorgan by Reuters

Policymakers at the Federal Reserve and at the White House expect the current pressures to begin to ease. However certain FED officials have acknowledged that inflation is stronger and perhaps more durable than they had anticipated.


BENCHMARK'S TAKE

  • Inflation sped up in June and exceeded expectations as consumers prices increased by 5.4% while economists expected a more moderate 5% gain
  • These numbers suggest that inflation is not limited to the expected base effects. These caused further turmoil on markets and future inflation readings may not calm markets
  • Going forward, we expect inflation worries to continue pressuring stocks. These will be supported by pent up consumer demand as saving rates reached new heights and indebtedness levels decreased
  • In order to benefit from rising rates and inflation expectations, we have invested in banking stocks
  • We have also invested into numerous technology stocks with a reasonable valuation as these could avoid a hard landing should rates rise, you can find these stocks right here:
Portfolio
We have invested in over 45 stocks throughout North America, Latin America, Europe and Asia. Typically, we target fast-growing companies (U.S. and global) with a market cap between $ 1B and $ 100B.

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Nik Shuliahin on Unsplash.