Ben Carlson, portfolio manager at New York-based Ritholtz Wealth Management, attempted to answer what is arguably the most important question for investors, namely, “Why isn’t inflation going down? ? »
One explanation for the persistence of inflationary pressures is the sharp increase in wealth during the pandemic. In the United States, the total net worth of Americans increased by 37% in the two years ending in March 2022, by far the largest increase in the data set that began in 1989.
Importantly, it’s not just the wealthy who have benefited from the trend. The bottom 50% of the population by wealth saw their total assets more than double, from $2 trillion at the end of 2019 to $4.4 trillion.
Less affluent groups also have a greater marginal propensity to consume – they are more likely to spend the new funds rather than save, and this demand has helped push up prices.
The same data is not available for Canada, but a similar trend is still apparent. From the start of the pandemic through June of this year, Canadians’ total disposable income grew 15% to $1.52 trillion, a much faster pace than the historical trend.
Businesses were able to pass on inflationary pressure and maintain profit margins by raising prices, which supported inflation at high levels. Operating profit margins in the second quarter of this year were a record 13.4% when, for context, they were between 5 and 10% from 1994 to 2014.
Carlson is surprised that Corporate America has so far escaped blame for its role in driving inflation. He writes that “Inflation was not caused by corporations and business owners… But while workers are blamed for demanding higher wages and the government is blamed for a spending spree and the Fed is blamed for keeping rates low for too long, companies have somehow avoided the backlash despite record profit margins.
Carlson is not convinced that companies will lower prices as inflationary pressure from supply chain issues eases and profit margins are likely to continue to rise as a result. This is good news for stock prices, but it comes at the expense of consumers.
— Scott Barlow, Globe and Mail Market Strategist
This is the Globe Investor newsletter, published three times a week. If someone has emailed this newsletter to you or you are reading it on the web, you can sign up for the newsletter and others on our newsletter subscription page.
actions to ponder
Gear Energy Ltd. (GXE-T) Based in Calgary, Gear Energy is a junior producer specializing in heavy oil assets in Alberta and Saskatchewan. Year-to-date, the stock price is up 55% and analysts see even more upside. Management recently announced the launch of a regular monthly dividend and the shares are currently yielding over 8%. Jennifer Dowty reviews the investment case.
Fortis Inc. (FTS-T) Its stock price has been battered by rising interest rates over the past five months, but the St. John’s-based utility offers investors a compelling argument to consider the stock: a low-risk growth based on energy expansion. David Berman takes a closer look.
The summary
High returns from covered call ETFs come with hidden costs
The financial industry knows that retail investors like nothing more than a hefty return, which is why covered call funds from ETF providers such as Bank of Montreal, Horizons ETFs and Hamilton ETFs have attracted billions of dollars in capital. But before jumping in with these high yielding products, you need to understand how they work and the risks involved. explains John Heinzl.
Four biases that confuse investors
Of the many biases we possess, there are four that pose particular problems for investors. These are loss aversion, overconfidence, the illusion of control and representativeness. Understanding the impact of each can greatly improve your decision-making, as investment adviser John De Goey tells us.
Bitcoin wants to break its link with stocks
After months of tears and tantrums, bitcoin wants to separate from the stock markets. Reuters reports that the cryptocurrency, which has been closely correlated to tech stocks for much of its torrid 2022, is staging one of its biggest efforts yet to break loose.
Surveys of market pros:
Gold is expected to rebound slightly next year as the Fed tightening cycle ends
Canadian dollar forecast cut as BoC follows Fed on peak rate bets
Others (for subscribers)
Wednesday analyst upgrades and downgrades
Tuesday analyst upgrades and downgrades
Globe Advisor
Why These Stocks Are the “Most Exciting Trade” for Canada’s Top Wealth Advisor
Are you a financial adviser? Sign up to Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis, and access to ProStation – a powerful tool to help you manage your clients.
What’s up in the coming days
Is it time again for investors to prepare for pot stocks? Philip MacKellar of the Contra Guys will have some thoughts.
Click here to view Globe Investor’s earnings and economic news calendar.
More Globe Investor coverage
For more stories from Globe Investor, follow us on Twitter @globeinvestor
Compiled by Globe Investor staff
#TSX #energy #stock #yields #tear #Corporate #America #isnt #blamed #inflation
