Beware The Inflation Trap

It is the mainstream financial media narrative du jour. After years of relatively benign pricing pressures during the post crisis period, we are now entering a phase of sustainably higher inflation. This notion has raised the specter that the U.S. Federal Reserve will need to raise interest rates more quickly than expected, has sent U.S. Treasury yields higher, and has shaken the U.S. stock market to the core over the past two weeks. But while the narrative certainly makes good sense, a key question remains critically important to ask. Are we really seeing any signs of the rise in inflation that so many have already assumed as given? And what does the true answer to this question mean for our stock and bond allocations?

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Thunderbolt

Clear and sunny skies have shined brightly on stocks for so many years. Ominous storm clouds have long loomed on the distant horizon, however. And now a loud clap of thunder has boomed out across capital markets in recent days. What are the implications of the sudden sharp pullback that began last week, and what can investors reasonably expect going forward?

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Stock Market: Danger Is My Middle Name

Published on Seeking Alpha on January 29, 2018

The U.S. stock market has turned parabolic. After steadily rising since late 2016, the S&P 500 Index has shifted into a higher gear to start 2018. Exciting? Indeed. Justified? Maybe, maybe not. Dangerous? That too.

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A Dark Cloud In Sunny Market Skies

The U.S. stock market remains relentless. It seems to rise strongly day after day without interruption. Pullbacks to the downside are no longer experienced over the course of months, weeks or even days, but instead can best be measured in terms of hours if not minutes as each and every pullback is snapped up almost unflinchingly by today’s risk eager marketplace. Indeed, the sun shines brightly on today’s U.S. stock market. But for those that have yet to completely abdicate from managing against downside risk, a dark cloud in an otherwise sunny sky for stocks is worth noting.

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A Stock Market Witches Brew

While a bubble of epic proportions is taking place in cryptocurrencies today, signs of a bubble are notably absent from another notable and arguably far more important segment of capital markets. But just because a bubble is not immediately present does not mean that conditions are not ripe for some sort of asset price escalation to soon take shape in relatively quick order. Prepare to float higher any future asset bubble, but also keep your feet on the ground in knowing exactly the market that you are investing in today.

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