The cat is out of the bag: inflation is no longer considered “transitory,” we have a new variant of COVID, and supply chain issues are still gumming up the works. Yay.
If I could sum up the economy of 2021 with one image, it would be:
Yes, blowing a raspberry seems to be the most appropriate way to encapsulate the economy of 2021.
Sure, there have been SOME highlights, but the fact of the matter is, while Wall Street has been hitting record highs, for many Americans, this past year has been a downright stinker.
Wall Street isn’t the only metric on which we measure our economy, and 2021 has seen the negatives pile up.
Inflation quickly became the biggest elephant in the room (don’t worry, there are OTHER elephants that we’ll talk about), and we need to consider what the pandemic and the decisions made over the past two years have cost our country.
Yes, hard calls had to be made, and only time will tell if those decisions were the correct ones—but we can’t allow politics or “compassion” to make us turn a blind eye to the cost of keeping millions of Americans locked down and afraid for two years.
Elephants In The Room
The inflation we’re experiencing right now directly stems from the economic decisions of past presidential administrations, and given that all signs point to no change in the foreseeable future, more Americans are going to be hurt by it.
This year, the cost of a Thanksgiving meal jumped more than 100% from 2020—and if the boat isn’t righted soon, that number is only going to go up.
That brings us to the reason we’re talking today: the 650-point drop in the Dow on November 30th, which followed hot on the heels of a 1000-point drop on November 26th. Both of these drops were caused by Federal Reserve Chairman Jerome Powell announcing that he will be taking steps to steer the economy away from dire straits.
Powell told Senators that the fed would have to speed up the planned tapering due to the emergence of the Omicron variant of COVID-19.
This shook the market, as sped-up tapering means that higher interest rates are just around the corner.
Powell told the Senate, “At this point, the economy is very strong and inflationary pressures are high, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases which we actually announced at the November meeting perhaps a few months sooner.”
The problem is, both inflation and the COVID variant are going to impact an already-impacted supply chain, which could very well lead to an even bigger problem than we’re already experiencing.
Hooray for us…
This is the economy in which we’re looking at – and it’s an economy full of problems that don’t have answers.
So… What Do We Do?
Sure, raising rates will start to slow things down…
But will it slow it enough to stave off hyperinflation?
There are so many questions left unanswered. As investors, we need to start looking for ways to shore up our finances and portfolios in order to help weather the coming storm.
Of course, there are plenty of ways to do that—and to be honest, savvy investors aren’t worried in the slightest about the specter of rising rates hanging over their heads.
Investors that have been paying attention realize that this is just another opportunity to make money—just in a different way than they have over the past decade or so.
Adapt to survive, right?
The coming economy will be a Darwinian event that will truly separate those who know what they’re doing from those who have just gotten lucky so far.
Time to batten down the hatches and use this storm to our advantage to help move us forward…
Or risk sinking the entire ship.
The choice is ours.
“Fortune favors the bold.” – Latin Proverb