Inflation is still a hot topic. However, the economic growth backdrop during a period of rising inflationary pressures is sometimes overlooked in the argument, particularly when it comes to equity market performance. Some inflationary pressures are already receding, according to Charles Schwab experts, with implications for the performance of impacted businesses’ equities. The bond market, wage growth, and productivity are all important indicators for the medium-term inflation prognosis.
See Gold Price Forecast: Hidden Inflation Genie to Keep XAU/USD From Rising – Deutsche Bank.
“At least in the short term, the predicted acceleration in economic growth in the second quarter serves as a counterbalance to inflationary pressures. Furthermore, if search activity is taken into account, the bloom on inflation may have already faded.”
“As the second half of the year progresses, and assuming that employment trends improve and supply shortages are resolved, a further decline in prices could coincide with some relief from inflationary anxieties.”
“While CPI rises from a year ago have clearly been significant, the change over two years casts doubt on the premise that prices are rising at a rapid and consistent pace. Inflation is still significantly below the levels observed during the Global Financial Crisis and nowhere like the 1970s’ astronomical rise.”
“The jump in real rates through March drove much of the sell-off in growth-oriented parts of the market earlier this year. They’ve since sunk and drifted to the side. This has allowed the growth trade more room to breathe. Importantly, while some cyclical and value-oriented regions have slowed their ascent, they haven’t slowed significantly, showing the strength of both the economy’s prospects and the value components’ sustained leadership.”
“Wage growth is still sluggish. The hyperinflation of fifty years ago was preceded by high double-digit percentage rises in workers’ salaries. This time, we’re not just not seeing it, but we’re also in a new labor market. The number and power of labor unions has dwindled, global wage inflationary pressures have subsided, and technology advancements have increased productivity.”
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