Americans expect inflation to stay painfully high. That’s good news for stocks.

[libertybele]

Americans expect inflation to stay painfully high. That’s good news for stocks.

Headline inflation may have come down over the past year, but consumers’ expectations about future inflation have not. In fact, five-year expected inflation has been inching up rather than down in recent months, according to the University of Michigan consumer survey.

The median expectation is that inflation will run at a 3.1% annualized pace over the next five years; you have to go back to 2008 to find a higher reading. The mean expectation, which skews higher, is the highest it’s been since the mid-1990s.

Such expectations are a source of worry to many, on the theory that they are self-fulfilling: If consumers expect high inflation, the argument goes, they will behave in ways that accelerate the pace of inflation. If the U.S. Federal Reserve at its mid-June meeting decides to hike interest rates rather than hit the “pause” button, one of the big culprits may be consumers’ stubbornly-high inflation expectations.

The historical support for this theory is surprisingly weak, however. More often than not over the past several decades, consumers’ inflation expectations were a contrarian indicator, with subsequent five-year inflation below average when expectations were above average, and vice versa............

https://www.marketwatch.com/story/americans-expect-inflation-to-stay-painfully-high-thats-good-news-for-stocks-85022c59?mod=home-page

[DefiantMassRINO]

High inflation does not necessarily correlate with higher stock prices.

Stocks have greater competition from higher yield Government bonds.  The ability to get a 5% annual yield with "no" risk, means stocks will be discounted accordingly.

Also, if the Fed's terrible Interest Rate increases continue, investors may be forced to sell assets to raise cash.  This puts downward, deflationary pressure on asset prices as there are more sellers than buyers.

Those who borrowed short-term money will be forced to retire the debt (deflationary); to sell assets (deflationary) for cash to borrow less or to pay for higher borrowing costs; or default (deflationary) on debt.

If the Fed continues to raise rates too quickly, there will be a deflationary death spiral ala 2008/2009.

If Government policies don't change, those policies will continue to constrain production, and keep  housing and energy costs higher than they would be if increased production was permitted.

[Weird Tolkienish Figure]

Yes, so happy that inflation is so high, and I cannot afford groceries or anything right now.

[libertybele]

Yes, so happy that inflation is so high, and I cannot afford groceries or anything right now.

It's not easy to stay afloat these days.  We are ok, but if our homeowner's insurance goes up the projected 40-50% as been rumored or if we get cancelled and have to pay higher premiums it's going to be a struggle.

[libertybele]

High inflation does not necessarily correlate with higher stock prices.

Stocks have greater competition from higher yield Government bonds.  The ability to get a 5% annual yield with "no" risk, means stocks will be discounted accordingly.

Also, if the Fed's terrible Interest Rate increases continue, investors may be forced to sell assets to raise cash.  This puts downward, deflationary pressure on asset prices as there are more sellers than buyers.

Those who borrowed short-term money will be forced to retire the debt (deflationary); to sell assets (deflationary) for cash to borrow less or to pay for higher borrowing costs; or default (deflationary) on debt.

If the Fed continues to raise rates too quickly, there will be a deflationary death spiral ala 2008/2009.

If Government policies don't change, those policies will continue to constrain production, and keep  housing and energy costs higher than they would be if increased production was permitted.

Stocks will pay out higher dividends to attract and maintain their investors.

[DefiantMassRINO]

Stock dividends may not increase because that requires that the company have a healthy underlying cash flow.  In a credit squeeze, companies will reduce dividends to preserve cash.

Companies are more likely to increase stock buybacks because they are more tax efficient for investors and they improve P/E ratios by taking stock shares off the market.  When the crap hits the fan, these same companies may float additional stock shares to raise cash.

Stocks will pay out higher dividends to attract and maintain their investors.

[Weird Tolkienish Figure]

It's not easy to stay afloat these days.  We are ok, but if our homeowner's insurance goes up the projected 40-50% as been rumored or if we get cancelled and have to pay higher premiums it's going to be a struggle.

Food and energy costs are hurting us pretty bad. We have above average income for this area, I cannot imagine how below average people manage.

[berdie]

Food and energy costs are hurting us pretty bad. We have above average income for this area, I cannot imagine how below average people manage.

It's so hard on everybody. I kind of understand why young people "fail to launch". He!!, even if they want to, housing transportation food just every day life is almost out of reach.

In the words of Anna Nicole "It takes a lot of money to be me".

[libertybele]

Food and energy costs are hurting us pretty bad. We have above average income for this area, I cannot imagine how below average people manage.

Food is ridiculously high around here.  I buy meat and other goods that are on sale and buy in quantities if I can. It's just the two of us.  We eat our leftovers that's for sure.  We also still have our dehydrated food to fall back on.

Food banks are scrambling needing donations and people are hurting, there's no doubt.

Some single folks claim it is cheaper to eat out then buy food and prepare it.  That means eating at cheap eats places, but they aren't going hungry.

We order in usually once a week and for the price, I can understand and usually we have enough left overs for another meal. (Just not the healthiest).

As for energy costs, we just got a notification from our electric company that rates are going to go down a bit. I'll believe it when I see our next bill.  It's the water prices that our outrageous -- and the taste and quality of the water has much to be desired.

[libertybele]

It's so hard on everybody. I kind of understand why young people "fail to launch". He!!, even if they want to, housing transportation food just every day life is almost out of reach.

In the words of Anna Nicole "It takes a lot of money to be me".

I don't see how young people are making it -- gas prices are through the roof and rent around here is astronomical.  Those that were able to buy a house before the housing boom hit around here, are for the most part maintaining.

[berdie]

I don't see how young people are making it -- gas prices are through the roof and rent around here is astronomical.  Those that were able to buy a house before the housing boom hit around here, are for the most part maintaining.

Yep. Even renting is ridiculous. I bought my place in the 80s...so I was very blessed. I keep an eye on real estate prices...I won't be able to move any time soon. Even if I got current market value....I couldn't afford anything else in the current real estate market.