GE said:
jayelbee said:
I think inflation concerns are overstated. We're closer to deflation being an issue than wild out of control inflation and crazy interest rates.
I'm curious as to why you think that? Is it based on things you have observed or economic theory?
For some reason I have it stuck in my head that inflation basically occurs when refers to the number of dollars available to be spent changes as a ratio of the amount of goods and services available for purchase (production). Probably far too simplified but am curious to know how your conception of it is different.
Many conflate inflation with lifestyle creep. Compared to a decade ago, I dine-out more (pre-covid), live in a nicer house, travel more often, etc... It would be easy to say I can't live on the same amount as I did a decade ago, but my lifestyle choices have more to do with it than actual inflation.
More to your point, we simply need to look at the decade+ following great recession ('07 -'09). There were at record levels of stimulus yet broad inflation did not come.
We could all use Moore's law equivalents to our advantage and buy TVs and other technology that is slightly dated and actually save money relative to prior... few do that, again a lifestyle choice, not inflation.
If we can begin approaching full employment again, see oil over-supply worked through as economic activity picks up and see relatively modest economic collateral damage from covid, we could see a pick up in inflation soon, but hyper inflation seems like a very low risk.
The biggest argument to me for inflation being weak in the near-term is that the Fed explicitly stated in August they will favor a strong labor market over trying to manage inflation to 2%. If they were worried about inflation getting out of control, that likely wouldn't be their stance given their dual mandate.
I am positioning more for inflation within fixed income given the ugly tradeoff between yield and duration. Thus, tilting to higher usage of high yield and floating rate instruments (favoring credit risk over duration risk) and tilting ever so slightly to equities for those with liquidity needs for next 3 years fully squared away.