Macro Minutes: Inflation: Where Do We Go from Here?

Some investors worry that a US legislative process known as reconciliation might threaten the potential market-calming effects of political gridlock by allowing new tax and spending bills to pass Congress with only a simple majority of votes. In his latest video, Fisher Investments’ founder and Co-Chief Investment Officer Ken Fisher explains why the Congressional reconciliation process isn’t likely to completely bypass political gridlock.

In May’s Macro Minutes video, Fisher Investments’ Portfolio Engineer Chase Arneson discusses inflation, focusing on the unique set of circumstances that have contributed to its recent rise. He explains why we believe those drivers are unlikely to continue and why inflation will likely moderate.

Key Points

• COVID lockdowns caused an extreme shift from consumers mostly spending on services to focusing on goods.
• The shift in consumption caused inflation in goods, leading to goods accounting for most of the increase in core inflation. But, we believe goods inflation will likely moderate going forward.
• While wage growth could stay strong, this does not necessarily mean total inflation must also rise.