December 2021

Never a dull moment.  It looks like the Fed has admitted inflation is no longer transitory.  It is amazing it took them this long, but I imagine the holiday season price increases finally brought them to their knees.  

I'm going to provide a prediction, something I am wary of doing, but here it is- inflation will hit 30% over a 3-year period.  If you compare 2023 to 2020, it will be 30%, plus or minus.  When I visited my local Starbucks a few weeks ago, I noticed a rather significant price increase in my Latte.  I mentioned it to the barista, and he said it is because they have to pay for his salary increase.  As a shift supervisor, he makes $15/hour, come next year he will be making $22/hour.  To make matters worse for my military subscribers, I did a comparison to an O-1 and an E-4 assuming they work 22 days a month, 8 hours a day (which we know they don't) and realized at their base pay they make ~$21/hour and $13/hour, respectively.  These are college graduates and servicemembers with leadership and technical experience.  Pay will have to increase, not only for our military members, but for society as a whole-leading to significant inflation.

So how do we deal with inflation?  The Federal Reserve must begin to "Taper", which means the end of easy lending, higher rates, and an eventual slow-down in the economy and quite possibly the stock market.  Look at the economy and interest rates in 1981-82 when we last had high levels of inflation for an example of what "could" happen.  However, for now, I think the mix above in each respective fund maximized the risk/reward profile and the Bond funds will not benefit significantly any time soon from the Fed's remarks.  Keep investing!