This week a contractor at my office reached behind a board and upset a wasp’s nest. I was standing by him, and it was like a cartoon. Several wasps rose in perfect formation, paused in the air for dramatic effect, and then chased him around the building. He was stung 11 times but laughed and said, “well at least we know where they are now.” The Labor Department’s consumer price index (CPI) was an unexpected sting too.
Inflation surged 9.1% in June. The CPI report on July 13th showed inflation had increased 9.1% from a year ago in June, higher than analysts’ estimate of 8.8% according to MSNBC. That makes this the fastest pace of inflation since December of 1981, for things like gasoline, groceries, and rent.
A big driver in this report was the big increase in energy and transportation costs. June gas prices were up 60% more than last year and 11% more than this past May according to Fox Business. The price of everyday essentials remains high, such as housing costs which make up 1/3 of the CPI and is up over 5% this year which is the fastest increase since early 1991.
One of the biggest worries for investors and the Federal Reserve is this inflation might become permanent. I think some of it will, like wages, but gas prices probably won’t stay this high forever.
Investing in times like these must be done strategically and without emotion. For my clients, I manage their accounts by moving their investments around for them which allows me to carry out an investment plan as the market moves.
In many of my accounts, I’m shifting exposure from bonds to small and mid-cap stocks because I think the fear of a near-term recession is exaggerated. Stocks often rebound from shallow bear markets and midterm election lows, and I see some attractive valuations in this space that could provide attractive returns once economic uncertainty starts to clear.
Younger investors should be considering this bear market a potential blessing and invest for their retirement since shares are undervalued. Older investors should know from experience that down markets like this are part of the cycle and should stick to their investment plan.
Our contractor came back later in the day and sprayed all the wasp nests. The stings were unexpected but gave him the opportunity to fix the problem before his employees begin working onsite. There are buying opportunities in every market, we just need to get over the current “sting” and start looking for them.
Have a blessed week!
Opinions voiced above are for general information only & not intended as specific advice or recommendations for any individual. All performance referenced is historical & is no guarantee of future results. All indices are unmanaged & can’t be invested into directly. Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.