Our Inflation Outlook - Adviser Investments

Our Inflation Outlook

When might inflation pick up in the economy, and will stimulus packages and larger deficits be the cause? Vice President Steve Johnson provided his inflation outlook in our recent webinar,* A Tale of Two Recoveries: Will Main Street Catch Up With Wall Street?

Please enjoy the excerpt below and click here for the full webinar replay to hear more. 

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Steve Johnson:

Ever since the financial crisis of 2008 and 2009, people have been asking: When are we going to see inflation?

Inflation has been benign over the last couple of years. There are some things that we are looking at, though. For example, if you look at unit labor costs, they’ve been increasing recently. The price of containers for shipping has gone up, and if you look at commodity prices, we’ve seen a big move in oil and a big move in corn as well. There are signs that inflation is increasing. But the most important thing to think about when it comes to the economy is really what we would consider to be the “output gap.”

The way that I think about it is, if the U.S. economy were a giant conveyor belt, that conveyor belt is not at full speed right now. We’ve seen a big decline in that output gap. Until we see growth, we need to see that rocket ship taking off into the second half of the year. Until that happens, I do think that inflation, although it may be increasing, is not going to be the biggest worry that we will see over the next six to 12 months, even if we do see increased stimulus and the deficit increasing.

Inflation increasing would actually would be a good thing, because it would mean that the economy is growing at a much faster clip than it has been over the last couple of years.

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Click here for a replay of A Tale of Two Recoveries: Will Main Street Catch Up With Wall Street? Please contact us at (800) 492-6868 to learn more about our comprehensive wealth management solutions.

*Webinar recorded after the market closed on Wednesday, January 27, 2021.

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