The silent killer of wealth just…won’t…die.
Inflation surprised to the upside again.
Not exactly shocking news for anyone who’s been to the pump lately.
Gas prices are surging for obvious reasons, and energy still flows through almost every part of the economy.
However, this spike in inflation could correct soon enough if an agreement is reached soon on the Strait of Hormuz.
BTW - do you notice there are never any problems with the Danish Straits? Why, because Nordic people are cool (that I’m largely from Swedish decent has nothing to do with this statement of fact).
Also…speaking of cool, here is an interactive map on energy shipping chokepoints for your teenagers (or for us Dads, who love maps for some odd reason) the most important Oil shipping channels.
Anyways, the timing of this inflation spike isn’t great.
Sustained inflation from an extend closure of the Straight would be a problem for the lower income consumer who is already stretched thin. They are hit hardest by rising energy and food prices because a larger percentage of their income goes toward necessities.
And, for the first time since the post-COVID inflation boom, wage growth is falling behind inflation again.
This is why consumer sentiment is at a record-low level despite the strength of the broader economy and stock market.
Consumers tolerated the 2021-2022 inflation shock partly because stimulus checks (aka “free” money from the sky) and excess savings cushioned the blow.
That savings cushion is thinner today.
So while the economy looks fine on paper, most American households still feel financially squeezed.
For investors, this is another reminder that preserving wealth requires more than “safe” fixed income returns.
We need the lower risk side of our portfolio to dramatically outrun inflation in order to hit escape velocity, where our portfolios grow faster than our spending.
Brad Johnson
