Take it from the good ole Waffle House: inflation isn’t over. Just last week, the 24/7 breakfast joint added a 50-cent surcharge on all egg orders at its 2,000 locations across the country, blaming cost increases related to the bird flu. But, look, it’s not just eggs that are, ahem, ruffling feathers ahead of the next US consumer price report. See, January’s inflation is notoriously difficult to predict because of seasonal swings. And this time around, there are also climate disaster effects to factor in. The California wildfires are expected to have caused a considerable jump in new and used car prices – enough to stir an upward move in inflation. What’s more, there’s a growing sense that even containing inflation at its current, higher levels might become a more difficult battle for the US Federal Reserve. Just last week, the White House set the stage for higher prices across much of what Americans buy – imposing steep new levies on goods coming in from the country’s biggest trading partners. It slapped 25% tariffs on goods from both Mexico and Canada, only to pause them for a month. It also announced a 10% tariff increase on goods from China, which took immediate effect. And now, the threat of an escalating trade war – with all the resulting damage it could inflict on economic growth – has become a major concern for stock and bond investors. Markets hate uncertainty – and a recent run of government policy announcements, followed by reversals, has made them uncomfortably volatile. But that could be the new way of things: so investors may need to learn to ignore the short-term noise and focus on the long-term outlook. |
