Inflation Infatuation

As you’ve seen in the news, there’s now maximum effort to ramp up vaccinations. I saw it first hand this week. Not as someone getting vaccinated, but as a reservist in the Coast Guard. I just received word the Coast Guard is deploying this coming Sunday for the vaccination effort. They told me to get my affairs in order in case I’m selected. 

With the mass production of vaccines and the public and private partnership to administer them, NBC reports we could reach herd immunity as early as June now. 

When we reach herd immunity, more people will feel comfortable going out to shop and spend, and 90% of families should have some extra walking around money thanks to the latest stimulus checks.

The government has officially let it rip, according to the Economist.

For a decade after the global financial crisis of 2007-09 America’s economic policymakers were too timid. With covid-19 they are letting rip. President Joe Biden’s $1.9trn stimulus bill takes to nearly $3trn, or 14% of pre-pandemic GDP, the amount of coronavirus-related spending passed since December, and to about $6trn the total paid out since the start of the crisis.

The Economist 3/11/2021

Spending $6 Trillion to juice the economy has to get us through this thing, right? So we’re good now? Unfortunately, solving one problem often creates another.

Now there are fears the $6 Trillion in stimulus will OVERHEAT the economy and spark inflation. This is partly to blame for a quick rise in interest rates the last few weeks and why we’re seeing volatility return to stocks.

Inflation is described as too much money chasing too few goods. We’ve already witnessed this in lumber, copper, and steel, as supply is constrained because of COVID, and demand skyrockets. We’re also seeing current retail sales data that shows consumers are out there spending like crazy. 

So will this latest stimulus doom us to massive inflation? 

Bank of America’s research investment committee says no, and brings some new data to the table. First, it cited data from the Census Bureau showing that of the households who received a $600 stimulus check in the first half of February, 73% saved or paid down debt.

Bank of America also surveyed more than 3,000 people to ask how they would spend the new stimulus check. Even in the lowest-income category, 53% say they plan to either save, pay off debts or invest.

Marketwatch 3/10/2021 article here

So for us, as investors, it appears if we do see higher inflation, it may only be temporary.

Client Portfolios

With inflation fears mostly overblown, we are ready to do some buying of stocks. Just last week the Nasdaq (mostly growth stocks) dropped over 2% in one day while the Dow (mostly value stocks) rose 1%. That hasn’t happened since the tech bubble burst in 2001. We used that opportunity to pick up a few investments in client accounts.

In the Growth Stock Portfolio, we bought Discovery Channel (ticker: DISCA) which started a new streaming service with the beloved Chip and Joanna Gaines from “Fixer Upper” and the Magnolia Network. We also bought the company DocuSign (ticker: DOCU), a company I’ve wanted to own for a while and one we use regularly for our esignature paperwork.

In our Funds Portfolio, we bought into The Motley Fool Fund (ticker: TMFC), a fund of mostly aggressive growth stocks. This will add some growth back into the portfolio after we took profits by selling most of our growth funds last year after a nice run-up.

Still waiting to hear back from the Coast Guard. If they ask me to stick people with needles I’ll be sure to warn everyone!

Thanks for reading. Please let us know if we can do anything for you.