Remember, the only choice is optimism, the pessimists never get it right.
If you’ve filled up your car with gas or bought any groceries lately, it will come as no surprise that it’s costing all of us more to live. The Consumer Price Index was up 6.9% for November. Inflation is back and it’s very real. The last time that happened was 1990.
That’s why we own equities.
The S&P 500 ended 1990 at 330.22. Friday it closed just above 4700.
The S&P 500 dividend ended 1990 at $12.09. Data from Bloomberg estimates that for the full year of 2021 it will be $61.03, quintupling.
The Consumer Price Index in December of 1990 was at 133.8. This October-per the most recent report- it was 276.6, barely doubling.
All this does not mean equities are a inflation hedge in the short run. They are not. No asset is. But as Wharton’s Dr. Jeremy Siegel concludes in his classic book, “Stocks for the Long Run” stocks are extremely good hedges against inflation.
I decided to write about this this week because, and I quote Nick Murray from his most recent newsletter and used with his permission, “Be assured that every single headline about inflation you’ve seen this year—and the text of all the accompanying reportage—mirror everything you would have been reading (and hearing) in late 1990, all but word for word.”
All the news is going to be bad. That’s what sells. And, yes, without a doubt, rising prices take their toll on all of us. But we’ve been through this before. The attached article about inflation speaks to this topic and I hope you take the time to read it.
I’ve also added an article about asset transfers as some of us may be considering year-end gifting or estate planning. As we head toward the end of 2021, I will be out of town for the Christmas holiday but still available electronically. So, should you have any questions or wish to talk, please give me a call.
Now, let’s all go out and make this week one of the best for a very up and down year.
PS: This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is not indicative of current or future performance and is not a guarantee. The investment opportunities referenced herein may not be suitable for all investors.