November 2021 Financial Planning & Investment Newsletter
by Financial Design Studio, Inc. / November 18, 2021
In This Issue: Financial Planning & Investing Newsletter November 2021
Each month we cover Financial Planning & Investing topics that apply to you. We cover a variety of topics to point out timely information that applies to you. See what’s in our Financial Planning & Investing Newsletter November edition!
Testing Our Thesis: Will Higher Inflation Eventually Hurt Stock Prices?
Last Fall we started talking about the prospect for higher inflation and what that would mean for the stock market. Our thesis was: if inflation moves higher, then stocks would suffer. Over the last year, we’ve certainly gotten a heavy dose of inflation, more than we would’ve thought. Yet stocks are sitting at all-time highs and are up over 20% this year. Is the link between (higher) inflation and (lower) stocks broken? We don’t think so. In this month’s letter, we lay out why we believe: 1) inflation will continue to surprise to the upside, and b) why stocks will eventually have to reckon with this inflationary reality.
How Has Inflation Increased Since 2020?
We’ve experienced a significant pickup in inflation in 2021. Back in the Spring, higher inflation readings were being driven by “base effects,” which means we were lapping abnormally low prices from the immediate months of the COVID outbreak in early 2020. But since May, inflation has continued to rise, surprising investors and government officials.
There are two major inflation readings that people watch. The first is the Consumer Price Index – All Items. This tallies up price increases for everything. The second is the Consumer Price Index – Less Food & Energy. This latter index smooths out volatile food and energy prices.
The graph below compares these two indexes going back to the 1950s. Current inflation readings are well-below the worst period for inflation in the 1970s. But if you look at the orange line, which is the “core” CPI less Food & Energy, we haven’t seen inflation this high since December 1991, nearly 30 years ago.
Giving Back: Sustainable Action International
As we said last week we will be sharing about organizations in our life that we are personally involved with over the next couple of months. Sustainable Action International was started 10 years ago by two of my friends from church, Evens and Karina Paul. Evens is from Haiti and always felt called to start a ministry serving his home town of La Victoire, which is about 3 hours north of the capital city of Port-au-Prince. I joined the Board three years ago after much prodding from Evens!
Quick History of SAI
Evens was able to procure a sizable plot of land for the future ministry grounds. Problem was, there’s no basic services in the area, let alone roads and supplies needed to start building. But they were blessed early on with partners who helped them build and design the grounds, including a church ministry housing.
Over the last 10 years we’ve built water wells, a Hope Farm, elementary and high schools, and most recently, a medical clinic! These met the most immediate needs of the community. For example, people in La Victoire used to walk two miles to get clean water. Our wells provide this water right there.
Financial Planning & Investing Newsletter November
If you’d like to catch up on last month’s October 2021 Newsletter you can grab that at this link!
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We are financial advisors in Deer Park and Barrington, IL. A team with a passion for helping others design a path to financial success — whatever success means for you. Each of our unique insights fit together to create broad expertise, complete roadmaps, and creative solutions. We have seen the power of having a financial plan, and adjusting that plan to life. The result? Freedom from worrying about the future so you can enjoy today.