Inflation 2014-2025

This is how inflation breaks down into its key components, as graphed by Bloomberg’s Economic Analysis:

Egg inflation, recently a matter of political controversy, has gone negative; but instant coffee inflation has gone ballistic, in large part because of sweeping tariffs on Brazil. 

The Great Rotation: explosive first wave of an inflationary cycle?

It’s time for a “great rotation” away from shares of faster-growing U.S. companies and toward cheaper stocks, according to Crescat Capital LLC. The money manager cited a comparison of enterprise value relative to sales for the Russell 1000 growth and value indexes in a blog post Saturday. Eight days ago, the growth-value gap widened to 3.41 points, according to data compiled by Bloomberg. The differential exceeded a peak of 3.40 points from July 2000, shortly after the end of an Internet-driven bull market. 

Inflation drags down S&P 500 earnings yield to record low

• S&P 500’s real earnings yield has plunged to its lowest on record at -2.3%, surpasses prior low of -2.1% in 1974

Inflation has never influenced U.S. stock valuations more than it does now. The S&P 500 Index’s real earnings yield, adjusted for changes in consumer prices, shows as much. October’s yield was negative 2.3%, according to monthly data compiled by Bloomberg. That’s the lowest reading since the S&P 500 was introduced in 1957. The previous low was negative 2.1% in March 1974, when the index was falling and the economy was in a recession. The indicator was highlighted by Liz Ann Sonders, chief investment strategist at Charles Schwab Corp., in a Twitter post Thursday.

Energy stocks, Treasury yields send U.S. inflation signal

Energy stocks and Treasury securities are sending similar signals about the U.S. inflation outlook, according to Michael Hartnett, Bank of America Corp.’s chief global investment strategist. He cited gains among “energy laggards,” specifically Occidental Petroleum Corp., and higher Treasury yields in a report Friday. The chart makes a wider comparison between the S&P 500 Energy Index and the yield on 10-year notes, which have both worked their way higher since March. “Trends say higher inflation,” Hartnett wrote, and commodities and other real assets are reaping the benefits.

S&P 500 is seen needing commodity help to solidify rally

• inflation gauge = ratio between Brent crude oil and gold  (8-month chart https://schrts.co/qYpTPXbh)   (https://stockcharts.com/h-sc/ui?s=USO%3AGLD&p=D&yr=0&mn=8&dy=0&id=p83486426733)

 U.S. stocks can use some help from commodities for their six-week rally to be “on solid ground,” according to Barrry B. Bannister, Stifel Nicolaus & Co.’s head of institutional equity strategy. Bannister compared the S&P 500 Index with the ratio between Brent crude oil and gold, which he cited as an inflation gauge, in a report Wednesday.

 

The ratio fell eight weeks ago to its lowest level since Brent futures began trading in 1988 and then dropped as much as 57% more through Thursday, according to data compiled by Bloomberg. Rebounds in the oil-gold ratio led to S&P 500 lows in 2002, 2009 and 2016, Bannister wrote.

S&P 500's valuation benefits from lack of economic misery

U.S. stocks are anything but overvalued after taking inflation and unemployment into account, according to Edward Yardeni, president and founder of Yardeni Research. He cited the signal sent by his Misery-Adjusted P/E Index, or MAPE, in a report Tuesday. The indicator is calculated by adding the misery index, the sum of the annual percentage change in consumer prices and the jobless rate, to the S&P 500 Index’s price-earnings ratio according to projected profit. Thursday’s MAPE reading was 24.2, a point below its average since 1990, according to data compiled by Bloomberg.

Houses Surpass Gold for Hedging U.S. Inflation

Anyone seeking protection against a pickup in U.S. inflation would be better off buying houses than

gold, according to Michael Hartnett, chief investment strategist at Bank of America Corp.’s Merrill Lynch unit.

     

 

U.S. house-price index, compiled quarterly by the Federal Housing Finance Agency, and the price of the precious metal since 1995. 

     The dollar’s buying power is poised to decline, Hartnett wrote, as the Federal Reserve seeks to bolster economic growth through bond purchases, or so-called quantitative easing. Fed policy makers raised the prospect this week that the pace of buying may increase from the current $85 billion a month.

     “No one knows if the QE experiment will ultimately prove to be successful,” the New York-based strategist wrote. “But we do know the ’journey’ involves asset-price inflation. With the outlook for gold looking more muted, U.S. real estate looks the best hedge.”

     Home prices rose 6 percent through the end of last year from their low in the second quarter of 2011, according to the agency’s index. The first-quarter reading is due May 23. Prices in 20 of the largest U.S. cities increased 0.4 percent through the first two months of this year, according to the Standard &

Poor’s/Case-Shiller index.

     As houses became more expensive, gold got cheaper. The precious metal’s price declined as much as 31 percent on New York’s Comex from its peak of $1,923.70 an ounce, reached in September 2011.