Recent inflation increases are likely caused by excessive fiscal stimulus (government deficit spending) and monetary stimulus (Federal Reserve easy money policies), pent-up consumer demand, and supply issues arising from the government’s literal shutdown of our nation’s economy and schools – in a poor response to the COVID-19 pandemic.

Inflation is also significantly tied to supply chain issues. These supply chain issues, and hiring issues, were directly caused by the recently-ended federal unemployment benefit subsidy. The enhanced federal-funded unemployment benefit, paid on top of state unemployment, clearly caused significant employment disruption, and a labor shortage, as the government (handing out free money to NOT work) competed with business hiring. Due to this, even huge international companies are suffering from supply chain issues due to a lack of willing workers. As a result, there is no one to load, unload, truck, and distribute goods. Receiving more money NOT to work, than to work, causes an increased demand for higher wages – wages which CANNOT likely be reversed. That is why we believe that inflation increases are in no way temporary! SFA’S VIEW IS THAT OUR COUNTRY HAS ALREADY ENTERED A LIKELY DECADES-LONG PERIOD OF HIGHER INFLATION PRESSURES. THESE PRICES ARE VERY LIKELY ALREADY LOCKED IN – THEY ARE ESSENTIALLY BAKED INTO THE CAKE!

As our firm has stated in several social media posts, our portfolios are uniquely, and carefully structured to benefit from the rising interest rates and inflation we see today and forecast in the years ahead. While horrible national policies, that encourage folks not to work, penalize our economic growth, they have also ignited inflation. Your SFA portfolio is benefitting from that inflation stimulus! Onward and upward!

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