Inflation, inflation, where's the inflation?
The U.S. Federal Reserve has been raising interest rates in anticipation of higher inflation.
In its 2018 forecast, Goldman Sachs indicated it expected to see "a gradual increase in global core inflation, albeit to levels that are still below central bank targets in most places."
At year-end 2017, Barron's wrote:
"Economists have raised the specter of inflation for several years, only to be disproved time and again. There's reason to believe, however, that 2018 will be different - that prices will finally rise in a more sustained pattern, forcing stock- and bond-market investors to react to a new trend. 'An unanticipated acceleration in inflation is probably the biggest risk for markets in 2018,' says Larry Hatheway, chief economist at GAM Investments.... Economists like Hatheway aren't expecting runaway inflation, as in the days of disco and leisure suits, when prices rose by double digits. They're girding for an annual increase of 2 percent to 2.5 percent at the most."
Last week, data released by the Department of Labor showed U.S. inflation, as measured by the Consumer Price Index, ticked higher (0.1 percent) during December. With food and energy excluded, the index was up 0.3 percent. Shelter, which reflects the cost of rent, rose the most (0.4 percent). The indices for medical care, new vehicles, used vehicles, and vehicle insurance all increased during December.
Some publications are predicting December's uptick in inflation will lead to a March rate hike by the Federal Reserve. It's difficult to say with certainty, however, until January's inflation report is released on February 14.
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Data as of 1/12/18
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1-Week
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Y-T-D
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1-Year
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3-Year
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5-Year
|
10-Year
|
|
Standard & Poor's 500 (Domestic Stocks)
|
1.6%
|
4.2%
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22.7%
|
11.2%
|
13.6%
|
7.0%
|
|
Dow Jones Global ex-U.S.
|
0.9
|
3.7
|
26.1
|
7.8
|
5.0
|
0.6
|
|
10-year Treasury Note (Yield Only)
|
2.6
|
NA
|
2.4
|
1.9
|
1.9
|
3.8
|
|
Gold (per ounce)
|
1.2
|
2.8
|
10.6
|
2.9
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-4.4
|
4.0
|
|
Bloomberg Commodity Index
|
1.0
|
0.7
|
0.3
|
-4.5
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-8.7
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-7.5
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DJ Equity All REIT Total Return Index
|
-3.1
|
-5.1
|
2.9
|
3.1
|
8.1
|
8.0
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S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
