The Week in Review: January 18, 2022
Ronald Reagan Was President When Inflation Was at This Level
It was June 1982, Ronald Reagan was serving his first term as president, and inflation was running at 7.1%, according to CPI data from the St. Louis Federal Reserve. At the time, inflation was quickly retreating.
Last week, the U.S. Bureau of Labor Statistics reported that the CPI, or the Consumer Price Index, rose 7.0% last year. It was the highest level since the summer of 1982.
Mostly, the culprits that lifted inflation last year remain in place:
Higher oil and food prices,
supply chain disruptions,
easy money from the Federal Reserve,
heavy fiscal stimulus that lifted demand at a time of reduced supply of some goods,
and a pandemic that distorted demand, favoring goods over services.
If we dig look below the surface, durable goods (such as autos and home appliances) rose 16.8% last year, nondurable goods (goods consumed over a shorter period) rose 10.2%, and services were up 4.0%, according to the U.S. Bureau of Labor Statistics (BLS).
Wages are now rising at a faster pace, which could force firms to pass along higher costs, exacerbating pricing pressures.
Despite plentiful jobs and the growing economy, Gallup said last month that its Economic Confidence Index fell to -33, the lowest since April 2020 when it was at a pandemic low. Rising inflation is affecting the national mood.
Fed Chief Jerome Powell has gotten the message. In his testimony before the Senate Banking Committee last week, Powell said: “If we have to raise interest rates more over time, we will. We will use our tools to get inflation back.”
He didn’t provide specifics or a timeline, but central bankers are already preparing investors. Several Fed officials said last week they are considering a March rate hike, and some said at least four rate increases may occur this year. That’s a far cry from a year ago when the Fed’s own projections reflected no rate increases through 2023.
If you have any questions or concerns, please don’t hesitate to let me know.
Two for the Road
The U.S. population grew at a slower rate in 2021 than in any other year since the founding of the nation. The country’s population grew by only 0.1% or an additional 392,665 people—the first time it grew by fewer than 1 million people since 1937. —U.S. Census Bureau, December 21, 2022
“Inflation is when you pay fifteen dollars for a ten-dollar haircut you used to get for five dollars when you had hair.” —Sam Ewing
This commentary reflects the personal opinions, viewpoints and analyses of the Stordahl Capital Management, Inc. employees providing such comments, and should not be regarded as a description of advisory services provided by Stordahl Capital Management, Inc. or performance returns of any Stordahl Capital Management, Inc. Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this piece constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Accessing websites through links directs you away from our website. Stordahl Capital Management is not responsible for errors or omissions in the material on third party websites and does not necessarily approve of or endorse the information provided. Users who gain access to third party websites may be subject to the copyright and other restrictions on use imposed by those providers and assume responsibility and risk from the use of those websites. Please note that trading instructions through email, fax or voicemail will not be taken. Your identity and timely retrieval of instructions cannot be guaranteed. Stordahl Capital Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
1.The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
2. The NASDAQ Composite is an unmanaged index of companies which cannot be invested into directly. Past performance does not guarantee future results.
3. The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
4. The Global Dow is an unmanaged index composed of stocks of 150 top companies. It cannot be invested into directly. Past performance does not guarantee future results.
5. CME Group front-month contract; Prices can and do vary; past performance does not guarantee future results.
6. CME Group continuous contract; Prices can and do vary; past performance does not guarantee future results.