The second quarter of 2021 has come to a close and many questions from clients and the market pundits surround the question “is inflation a problem in the coming years?”.
With the massive stimulus from the government over the last 12 months there is no doubt there is what the Fed is calling “transitory inflation” or in plain spoken language “short term inflation”. The big question is will this increase in prices persist and continue to move higher over a longer period of time. The majority of the talking heads on TV seem to think so, but they are rarely right for very long.
On the other side of the coin, you have a much smaller group of economists (including the Fed) saying that the supply side needs some time to respond, we think it will, in the second half of the year. Which is about the same time as those government stimulus measures begin to fade and the heat comes off demand.
At Creekside, we are sticking with the old cliché of “don’t fight the Fed”. The Fed is saying this uptick in prices is short term and we agree. We think the economy is reflating after being deflated by the Pandemic.
We will continue to watch the numbers closely, but we do not recommend shifting portfolios to try and bet on Inflation or deflation.
We have included some definitions below and would be happy to discuss this topic further if you have questions.
The Creekside Team