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Inflation risks have always been a point of concern for investors. For the last few years though inflationary risks have been given a new spin by financial mass-media. Low inflation in consumer prices has been portrayed as a sign of weak economy, while high inflation has been rendered as an indispensable condition of stable economic growth.
So far as CPI data was printing the numbers below “officially healthy” level, the pretext of having near-to-zero interest rates was rock-solid – in the environment of persistent disinflation soft monetary policy was perfectly justified. Investors have been inured to free-flowing liquidity contingent on tamed inflation. Indeed, the expectations of interest rate hikes has never dissipated, as the Fed used to consistently hint at imminent tightening.
It seems that now the tide is turning – even official CPI data evinces building inflationary forces in the US economy. For investors this inflationary pressure is an early portent of impending rate hike. It seems that nothing stands between higher interest rates and the Fed now – inflation is in sweet spot, if not higher, unemployment is at very low levels, at least officially, and GDP numbers are going up. The stock market along with bond market are feeling the pinch – stock indexes are significantly off its highs, while yields on high-risk bonds are going higher. It looks that the current market conditions, when US dollar is no longer a safe-heaven currency, are conducive for rise of assets of utmost safety – precious metals. The great gold bull is about to run.
So far as CPI data was printing the numbers below “officially healthy” level, the pretext of having near-to-zero interest rates was rock-solid – in the environment of persistent disinflation soft monetary policy was perfectly justified. Investors have been inured to free-flowing liquidity contingent on tamed inflation. Indeed, the expectations of interest rate hikes has never dissipated, as the Fed used to consistently hint at imminent tightening.
It seems that now the tide is turning – even official CPI data evinces building inflationary forces in the US economy. For investors this inflationary pressure is an early portent of impending rate hike. It seems that nothing stands between higher interest rates and the Fed now – inflation is in sweet spot, if not higher, unemployment is at very low levels, at least officially, and GDP numbers are going up. The stock market along with bond market are feeling the pinch – stock indexes are significantly off its highs, while yields on high-risk bonds are going higher. It looks that the current market conditions, when US dollar is no longer a safe-heaven currency, are conducive for rise of assets of utmost safety – precious metals. The great gold bull is about to run.
