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7 posts tagged with "Inflation"
Wells Fargo's Chief Macro Strategist Gary Thayer examines the potential help that foreign countries could provide to the U.S. via interest rate cuts. "The U.S. economy has weathered many problems during the past year and has proven more resilient than many investors expected. The good news is the U.S. economy could benefit if inflation subsides this year. That’s because several of the foreign countries that raised interest rates to fight inflation early last year could cut interest rates early this year if inflation decreases as the global economy slows down."
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Money manager Janus reviews need to know information about inflation and the implications to the global equity and fixed income markets. "Rising inflationary pressures have become a greater concern for many investors. In a recent roundtable discussion, Janus Portfolio Managers John Eisinger and Matt Hochstetler, and Head of Fixed Income Strategy Colleen Denzler, weigh today's potential inflation risks. The group offers insights about the recent climb in commodity prices, the challenges firms may face with margin compressions and how the changing inflation landscape is shaping opportunities across fixed income and equity markets worldwide."
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Chief Macro Strategist at Wells Fargo, Gary Thayer, looks at the history of inflation and the total increase in consumer prices per decade. "As consumers we know that prices of most goods and services go up over time. However, the rate of increase is not uniform. Prices sometimes go up fast. Other times they go up slow. Investors need to take inflation into account when anticipating both the performance and purchasing power of their portfolios over time."
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Wells Fargo looks at long-term inflation and the Federal Reserve's actions throughout history to keep it in check. "Investors trying to anticipate the performance and purchasing power of their portfolio over time should focus on long-term inflation not short-term inflation. During the past month, short-term inflation expectations have declined slightly as energy prices dropped and the Fed announced it would end quantitative easing in June. Nevertheless, long-term inflation risks persist."
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Posted by Thomas Wilson on 5/9/11 10:47 am
In this week's note from Wells Fargo, Chief Macro Strategist Gary Thayer looks at the history of inflation and its impacts on different areas of the economy. "In our opinion, investors need to be concerned about inflation for two reasons. First, in the short run, inflation can affect Federal Reserve policy and the financial markets. Second, in the long run, inflation can affect the purchasing power of savings and investments."
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Money Manager Lord Abbett slices and dices the inflation story in their May commentary. Concern about inflation these days seems to travel along two separate avenues. On the more technical side are the worries over recent food and fuel price spikes and the objections to Washington's practice of excluding such price moves from its analysis and policy decisions. The second, very different concern takes a much longer-term view and worries that federal budget deficits and the liquidity poured on markets during the past two years or so by the Federal Reserve will cause considerable inflationary pressure in 2012 and beyond.
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Many investors are worried that the financial system is flooded with money because of the surge in Federal Reserve lending since the financial crisis worsened last year. However, a complete picture of the supply of funds from Fed and non-Fed sources shows that the increase in Fed lending does not even offset one-sixth of the decline in non-Fed lending since the third quarter of 2007.
The supply of funds from non-Fed sources has dropped by more than a $6.0 trillion seasonally adjusted annual rate during the past six quarters. Non-Fed lending has declined because of de-leveraging in the financial system and because of reduced investor purchases of securities that proved to be more risky than originally thought before the financial crisis.
Federal Reserve lending in the three quarters ended in March averaged 23 times higher than its normal quarterly lending in the 10 years prior to the financial crisis. If this is the only part of the lending picture that you saw, you might think that the Fed is over doing it. However, a 23 fold increase in Fed lending is not inflationary when it only offsets some of the reduced lending from other sources.
Source: Gary Thayer, Chief Economist at Wells Fargo Advisors
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