Fear of inflation 2021
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Let’s talk about inflation for a moment, as concerns about rising prices are boiling over, and regulators can work them to our advantage.
If you’ve been looking at the markets – and I suppose there are – you know that the Treasury’s 10-year rising yield, and the rate of inflation it will bring, is under pressure put on stocks – especially technical stocks.
The tech-heavy NASDAQ, which outperforms the S&P 500 over just about any timeline, has fallen far behind in 2021 as of this writing. Meanwhile, Treasury levels continue to climb.
This is where the story becomes interesting, as the fear of inflation usually puts pressure into the gold – but that does not happen this time.
So if the fear of inflation is not driving money into an inflation-based hedge like gold, what is happening here? The answer feels surprising at first, until you go down to the data: the fear of inflation is simply drunk.
The difference between inflation concerns and real inflation
Economists agree that the recent $ 1.9-trillion stimulus bill and the growing vaccine rate mean we are moving swiftly towards a consumer-filled economy by spending money and spending opportunities. More consumption means more inflation, so inflation will definitely rise.
But to what extent will it rise?
To answer that, we need to look at a metric followed by the Federal Reserve showing the expectations of inflation based on what traders are doing. This is not an academic exercise; that is what trillions of dollars betting on the value of the green are saying back on inflation in the coming years. That metric is rising, as it has been since the beginning of the pandemic.
Inflation expectations rising
Inflation expectations
Federal Reserve
But if you look at the white spot at the beginning of this chart, you can see that normal market inflation expectations (2.01%) are just a hair above the pre-pandemic expectations of 1.88%. Further, it is 2.01% where the Federal Reserve wants inflation to be. So if anything, we are now hitting the inflation target ought to be.
But that is now. Shouldn’t we be worried that this line is going up, meaning we’ll be above 2% and soon get into dangerous terrain? Not exactly.
Inflation expectations remain low
Inflation expectations
Federal Reserve
If we move out to the last decade, we will see that inflation expectations are now where they were in mid – 2019 and are much lower than they were during the 2010s. Inflation expectations were closer to 2.5% over that period, but the 2010s were far from the time of hyperinflation. In fact, the opposite problem.
Expectation is not true
Inflation expectations
Federal Reserve
When we compare the true rate of inflation, as explained by changes in the consumer price index, we can see that the rate of inflation has been constant, and low, over the decade. gone.
What to do now
With inflation capturing the attention of the financial media for a few weeks, contrarians had a good chance of buying in by raising the NASDAQ 100
NDAQ
However, some tech assets are much better off.
The BlackRock Science and Technology Trust (BST), for example, up 6.1% over the same period and at the same time paying a 5% installment, which is almost 10 times the pay by the tech criterion Urras QQQ Invesco (QQQ)
QQQ
BST, which has big tech names like Apple
AAPL
MSFT
Michael Foster is the Principal Investigating Officer for Contrarian preview. For more revenue feedback, click here for our latest report “Inevitable Income: 5 Bargain Funds with Safe Gains 8.3%.”
Published: gin