On May 12, 2021, we stated in a social media post that inflation is rising “due to economic ramifications resulting from excessive fiscal and monetary stimulus, pent-up consumer demand, and supply issues arising from the government’s shutdown of our nation’s economy in response to COVID-19.” Here’s a good example of what we meant.
Like most national corporations, Tyson Foods Inc. is struggling to contain inflationary pressures. CEO Donnie King said that Tyson is fighting to raise prices fast enough to keep up with higher costs. The price increases come as Tyson, like many other companies, experience higher raw material costs, global supply chain disruption caused by government COVID policies, and a rebound in consumer demand. On the company’s third-quarter earnings call, King said that “we have seen accelerating and unprecedented inflation…Inflation is up about 14% during our 3Q [third quarter] and 9% year-to-date.” As inflation rises, so does the cost of virtually every consumer purchase.
Our firm believes that INFLATION IS IN NO WAY TEMPORARY! SFA’s view is that our country has already entered a likely decades-long period of higher inflation pressures. The more economic stimulus that is applied, both from the Federal Reserve and fiscally from Congress, the more pronounced and long-lasting these pressures will be. Economists and pundits who claim that the current widespread high inflation is short-term, are, in our view, ABSOLUTELY incorrect and clearly are not knowledgeable about economic history! But – higher inflation, which is extremely destructive to bond investors, will actually result in higher inflation-adjusted earnings for equity investors! In other words, higher inflation will push your stock values upwards. We stated in our December 31, 2020, video that “We believe interest rates will increase in 2021 (pushing down bond values), but that the equity markets will remain strong.” Rising interest rates and inflation should not affect your portfolio. Folks, your SFA portfolio is uniquely and appropriately positioned for there continued inflationary pressures!
Full listing of all disclosures (bit.ly/3lGX3mM)
#finance #economy #stockmarket