So much for the market “pop” I expected with the employment report that came out on Good Friday. It appears that the less-than-expected numbers, even though positive for the first time since 2007, were not enough to jolt the market. Even adding the better-than-expected pending home sales numbers didn’t provide the jolt I expected. The market just keeps slogging uphill, which is not a bad thing mind you. Nevertheless, the economic recovery is on track, and, apparently, the market needs more convincing with more improving economic indicators, which will continue rolling in slowly over time. Mind you, not everyone shares this opinion …
Economic Recovery? It seems to me the US has some really long-term problems going forward. That doesn’t mean that the markets won’t move higher. I have heard even some contrarians claim that the markets may move considerably higher. This might eventually only reflect an extremely inflationary environment (devaluation of currency). So, from that point of view, the markets may, for astute traders, be a place to maintain a hedge against inflation. For the average working person though, it is difficult to see how there won’t be financial hardships for some time to come.
The writer of the above is onto that “something” that is maintaining uncertainty in the market – fear of hyper-inflation. What some are expecting, and have been for some time, is not just an economic recovery accompanied by everyday, run-of-the-mill inflation. Some predictions are for an economic recovery stifled by a devalued currency in combination with inflationary pressure that always accompanies economic recovery. If this economic environment evolves, the writer states, “it is difficult to see how there won’t be financial hardships for some time to come.”
I agree with the writer above that hyperinflation is possible, but I disagree that it is imminent. I also disagree that financial hardship “for the average working person” is the future. Simply, as the economy improves, the daily life of many will improve. More people will go back to work, spend more money, and the cycle will continue. Not all, but many more people will move from financial hardship to getting by at a minimum and many others will do better than getting by – they will prosper. This is historical inevitability at work.
As to the “astute trader” using the markets to hedge against inflation, so be it. This strategic approach is neither new nor fool proof. In fact, the markets have historically outpaced inflation (as the writer suggests), but if one is not well informed and focused, using the markets to hedge against inflation could turn out to be catastrophic. Pitfalls abound and pundits, analysts, and snake-oil pushers point to all of them. Get into gold today. Buy oil now. Buy this long and sell that short. Caveat emptor (buyer beware) is the motto to follow here. My personal view is wait, watch, and then act. In the near term, inflation is the very least of the issues facing the markets today.
Trade in the day; invest in your life …
