Inflation

Big name economists continue to scramble to upgrade their GDP forecasts citing soon-to-be-arriving job gains, ‘monster’ savings, pent-up demand and – coming to a state near you – another package of massive fiscal stimulus complete with a Biden bow. Albeit, perhaps, it being less about stimulus and more about getting everyone through the endless winter of the pandemic. Either way, spring is coming and another four-digit stimulus cheque straight from Washington is a welcome sight. Cash is there to be spent, hence the upward revisions to growth. The bulled-up macro picture – some recent jobs data aside – continues to offer encouragement, and yet also comes with a side serving of inflationary angst. Given the ongoing domination of everything tech, deflation in many channels remains a persistent and, dominant, thread; but the tone to the recent round of company transcripts has turned inflationary. Kimberley Clark spoke of an expectation of ‘significant’ cost inflation. 3M too. The CFO told those dialling in on Zoom, that he expected ‘prices to be positive based on all the inflation that we are seeing.’ Indeed it’s everywhere, as anyone involved in freight or shipping will tell you. Fortune Brands top boss cooed ‘I do think going into 2021, eyes wide open that we’ll have inflation on multiple fronts, material, logistics and labour’. In the US, the Fed’s preferred measure of consumer inflation is going up and even in Europe, core inflation – that where energy and food is stripped out – went from 0.2% in December, to 1.4% in January. Those who comb the details of the ISM report also whisper that even without a jump in demand, inflation is on a march. And oil has just breached $60, a new post crisis high. No surprise then to see yields backing up. That, for anyone who reads the financial press, is known; but what to do about it? Banks are getting some air, so too commodities. As you might expect. There will, though, be many other beneficiaries with some offering much more juice, for – perhaps – far less risk. For those not partial to a #silversqueeze, the business models of the online brokerages might just be worth a look.

[All quotes taken from results call transcripts]