September's inflation numbers ticked up a bit. So we talk about that. This time we dig into why exactly this happened this month. Also what it means for us as investors and consumers and how all the bad news may not impact all of us the same.
September's inflation numbers ticked up a bit. So we talk about that. This time we dig into why exactly this happened this month. Also what it means for us as investors and consumers and how all the bad news may not impact all of us the same.
Hey guys, what is going on? Welcome to another episode of The Life finance and in between podcast with me your host, Eddie Thomas, brought to you by wealth management services in Hershey, Pennsylvania. So what's going on today, it's gonna be a quick one, because we're going over one thing and one thing only. And that is inflation, because I made a lot of headlines really recently. And I want to have a little talk here when I react to that and go, go from there. If you're listening, thanks for listening, if you're watching on YouTube, thanks for watching. Let's dig into it. So what happened? Inflation is up. Point 0.1% from the last reading that we had that came out in the middle of August. So it's at 8.3% at the moment. And so what I'm going to do, like I said, I can't it was up, people reacted, it's at a point 3% We'll go through, why is it up? The good and bad because there is good and bad news. And then after that we'll talk about what does it mean as investors and consumers and what can we expect going forward? Or what can we hopefully expect going forward? So like I said, a quick episode today just talking about one thing and one thing only. But when it's made headlines more than anything else in this entire year, I'd say it's pretty much worth talking about. So let's get into it. So anytime I've ever been asked you want the good news or bad news? First, I always start with the bad news. Because the good news, well, you just hope it lifts you up a little bit more than the bad news brought you down. So let's talk about the bad news. What drove inflation up over the past month and a half, or month, or annual, but what what drove it up in this past reading. And there's two major things that drove up inflation. One is rent. And the other is food prices. So rent prices are actually up 6.7% annually, not what you want to see. Now we want to see up 6.7% annually. And there's a reason why what has happened, especially this year, specifically, is mortgage rates have increased pretty rapidly, they started the year at roughly 3%. I think today, middle of September, they're sitting at right around 6%. So they've increased rapidly. And what that means when mortgage rates increase is people either going to sell their house for less, which hasn't really happened. And because that really hasn't happened, they're going to rent those people that were looking for that home to buy can no longer really afford it. So they're going to look for someone to rent. Well, when there's not enough supply in the renting market, like there isn't right now, that drives prices up. So you have an influx in demand, not enough supply. Supply and demand laws tell you that drives prices up. And that's what we've seen for the past year, especially this month, did not this month, this year, when mortgage rates have increased very dramatically, like I said, so that is what drives rent prices up. The good news for that is if you own your own home, wherever you're in a locked mortgage at our locked rate, no matter if it's 3%, or 6%, you're no longer kind of subject to those rising prices or variable prices, because you're locked into what your rate is. So you're good. The bad news to that side of it is if you're looking for someone to rent, it's no secret, it's no surprise that things cost much more 6.7% more average annually. So that is one major factor that drove inflation up a little bit the point 1% that arose. The second one, and this impacts all of us, no matter who you are, is food prices. And they were up 11.4% annually. And that's obviously significant. No one likes to see that significant. So why? Well, same thing with supply and demand, demand is up, especially recently, because as inflation continues to go on, people have less and less money that they want to spend going out. They don't want to go to restaurants as much. So that's gonna they're gonna stop doing that, because it costs more to go there. And there's gonna stop going to bars and all those places pretty much anywhere that could serve you food. They stopped going there because when things get a little costly, that's what you do you cook more at home because it should cost less to do so. So demand goes up because people aren't going out as much. What happens otherwise the supply side gets messed up. We've had global droughts, we've had supply chain issues, whether it's the Russia Ukraine war, whether it's domestic supply chain issues with just not enough trucking or trains or but whatever it is. We've had supply chain issues. The other side of it, we have fuel costs, which until this past couple of months was going up. We've had labor costs which are coming You're going to rise. And we've had packaging costs when other costs go up packaging continue tends to follow the trend and also go up. So when you have three costs that go up, you have demand raising, and you have a lack of supply or supply hiccups, that's going to raise prices. And that's where we're at, we have higher food prices. Because of that. We've seen some of these costs come down, like I said, fuel starting to come down, shipping costs are starting to come down, supply chain issues are starting to be figured out. So while yes, food is still rising, I wouldn't be very surprised as we start to see those costs come down as long as the supply chain can, can continue to be figured out and evened out and smoothed out to a point where it's working efficiently. Again, I wouldn't be surprised if food prices come down. But no one controls mother nature and the weather. So obviously, Global Jobs are one thing. Who knows when the Russia Ukraine wars fully gonna kind of come to an end and Russia and Ukraine can get back to actually producing and supplying the exports that they have from wheat prices and other exports that they have in the food category. So who's to say when but there is a there is a solution and a future where food prices start to come down. But for now, they're up 11.4%. And that's not one that really any of us can avoid. So that's the one that really, really is a detriment. Like I said, rent, you can't avoid food prices, you can't. That's the bad news. Those were the two that really drove it up. And why were up 0.1%. What's the good news? Well, it might be more good than you think. Gas dropped again, gas came down, guys actually came down 10.6% In August, is down to roughly $3.70 A gallon from $5. And if you're like me, you're thinking, well, it was nearly $2. Not all that long ago. And it went up to five, you can't tell me that coming back down to 370 is good. And I would agree if we're using that bottom number going from $2 to $3.70 cent gas is not good. When you compare it to where the highs were, we'll take $3 Somebody sounds gas for now. I sincerely hope it keeps coming back down or it keeps dropping. And it's forecasted to keep dropping as demand for decreases in supply for it increases. Hopefully the price for it keeps dropping, and that will keep bringing down inflation. So gas down. Because gas is down, energy costs are down 5%. So it doesn't cost as much the year as it doesn't cost as much to keep the lights on it doesn't cost as much to just use energy. Because gas prices are down. So that's a good thing. That's another thing. Good thing. So as long as that continues on that trend, inflation will continue on the trend of coming down in those two areas. Airline fares because gas are down because energy costs are down are also down 4.6%. The other reason airline fares are down is because as people start to kind of get a little stricter on their budgets, and don't want to spend as much on travel. The airlines see that and they react to the price that they have to spend to get someone from point A to point B, and then they in turn lower their fees. Another good thing for consumers if you have to fly. And finally the last one, this is barely down but use cars are down 0.1%. And 0.1%, like I said isn't much coming down. But it shows that finally hopefully, the car market is going to start leading itself back to evening out and coming back to a normal place. Because for a while there and still now you can sell your used car for more than you bought it. And good luck buying a new one because their prices are elevated and you new car same thing that our prices are elevated because of lack of supply and increase in demand. But as supply chain issues get ironed out as new semiconductor plants come online and create more semiconductors as parts aren't as hard to come by. Those prices will come down over time. And I'm thinking we might have seen. Excuse me, we might have seen the first step in doing so. At least I hope so. So all in all rents up 6.7% foods up 11.4%. But gas is down 10.6% Energy is down 5% airlines are down 4.6% and used cars are down 0.1%. There's a bunch of other factors. Those are the six that stuck out to me the most and the ones I really wanted to go through. You take that all into consideration and inflation up from the last reading 0.1% to 8.3% annually. What does this mean for investors? What does this mean as consumers? Well, investors with how the markets been and we saw this pretty much immediately these numbers were amounts announced and the market sold off because of the fear of wow, we're not dealing with inflation yet. People panicked and sold off It could have been the complete opposite. And if inflation numbers kept coming down, people would have poured into the market and most likely bought because people are then excited and happy that it seems like we're getting things under control. Here's my take on that, we're still getting things under control. It's just when have we ever seen any sort of solution come to something in a perfect, perfect scenario where there's no hiccups, it's just perfectly flat. And even where we always have it under control, we always have it solved. That's not the case. So yes, we're gonna have inflation numbers that come in where we don't want them. And that has happened in the market sold off as investors, that's not a reason to get out of the market, these things are going to happen, it's not going to be perfect one way or the other. If inflation was just going to keep dropping and dropping and dropping and dropping, we'd see the market explode because of it, if it's gonna keep going up and up and up and up with yourself because of it, but that's not how anything works. And I do think we've seen the peak of what inflation is going to be, I do still think we're coming down from it, it's just going to take some extra time, the Fed is gonna raise their rates, and they're gonna try to kind of put a little hamper on inflation. And I think it's going to work over the long term, we just have to be patient and understand that not every reading is going to be the best possible news out there. And that doesn't mean to leave the market as an investor might mean to actually use these people panicking as a buying opportunity, if that's where you're at, if that's where you are kind of in your in your investing journey. And again, this isn't personal advice for anyone. This is very much so broad based. My thoughts on it, if you have your own personal situation, please talk someone please talk to a professional about what you should be doing and when. But as we see someone as we see people panic, because inflation numbers increase a little bit. Think the Panic was overdone. I think the selling was overdone. I don't think this is something I think the next inflationary, maybe the one after that, you'll start to see good news again, you'll see the market react to it, we're just going to see these volatile swings up and down as investors because people are just waiting for the next good news or bad news to react on doesn't matter which way it goes. And if it's bad news Mark goes down, it's good news Mark goes up? Well, at the end of the day, we're gonna get both pieces of news at one point or another, the markets gonna react both ways. Historically, we've seen that the market does, alright. And we have to remember that as investors, we have to remember that, like I said, a bunch of times short term is going to be volatile. It's always going to be volatile, long term, things tend to be okay. As consumers, what does this mean? Well, like I said, if you're renting, it means things cost more. And that is unfortunate. And I do think there needs to be a major push to getting more supply into the rental market. And we need to have landlords and I understand that the business, unfortunately, you would hope landlords don't take advantage of this. Again, you can't fault them for doing so because they have to make money and then they run a business as a landlord. So the other the other solution to that is just more supply. And that takes time. So we might see a little bit of time until rent prices even eat either even Outteridge start to lower a little bit. I don't know if you'll see him lower as much you'll see him even out. And that takes more supply, like I said, so hopefully over time we see that food prices, like I said it's its own thing. I I think we will figure out the supply chain, part of that. But as consumers, you're just you're kind of stuck paying the prices we pay. I've seen articles that people are starting to opt for the less expensive brands. And I think you'll continue to see that and US consumer if that's where you see yourself going. And that's the kind of path forward and perfect do that, if that helps if that does a job for you to kind of save more money on the month month if you need to do so. And I think we'll start to see food prices not accelerate at such a high price and at such a high rate. And then over time, as like I said supply chain issues get brought out global droughts kind of end, the Russian Ukrainian war comes to an end where it will see it even out again to come back to equilibrium. It's just for now the demand is up because people don't want to eat out and over time that'll that'll even itself out too. You just got to find the ways in the meantime, where there's more coupons, whether it's buying the cheaper product, whatever it is buying less, making sure you still have enough making sure you're still eating but doing so at a cost efficient basis, if you can. The other side of it though, gas prices coming down as consumers is great. Obviously, no one likes spending $5 A gallon at the pump. And for a while their prices were pretty significant. And now that they're coming down again, and like rough average throughout the nation is $3.70 a gallon. Again, not ideal, not great, but they're coming down which is really good as consumers because that really is going to help bring down inflation over time. Same thing with energy when especially going into winter months trying to keep your houses warm. If energy costs less, that's perfect that ideal for consumers going forward. So what do I see going into the end of this year? Well, I'll reiterate what I said before. I I see this As an up and down roller coaster, there's gonna be months where we have great inflation, right? There's gonna be months where we don't. That's life. As investors, you have to kind of take both of those and move forward. Where do I see inflation going? I think if we continue to see gas prices and energy prices decrease, we'll see inflation start to decrease as well, I think the Fed increasing rates over time is really going to actually do its job and bring down inflation. What are the variables inside of that I think are yet to be seen. But we just need more supply, whether it's food you need more supply and food with with just more efficient practices, more efficient farming, more efficient supply chain that will come. And then housing, you just need more supply. And that will come over time, too. So in the next couple of months, to the end of the year, you're going to see a lot of headlines, you're going to see a lot of new stories, especially with the midterms coming up. Then numbers are the numbers, inflation will continue to come down. And we'll be in a point where, what's the next part of that after inflation comes down? What's next? That's where we're going to be I don't know if it's within six months, 12 months, 18 months, but we know it's coming down. I think inflation has peaked. I'm not saying that it's gonna go down. We're gonna have lower inflation readings a month over month over month. I don't think that's the case. But I think the general theme will be in the direction we want to see it. So that's really it for today. Guys, I wanted to jump on here quick talk about inflation, talk about why we saw it go up, what went down, what's the good news? What's the bad news, what to make it as investors and consumers. And that's really the gist of it. And I'm sure there'll be another one next month that I can make reacting that and talking through that one will probably sound a lot like this one. But until then, I'll be on it before that. And until I'm on here again. Stay happy, stay healthy, and I'll see you. Securities offered through securities America Inc. Member FINRA slash SIPC. advisory services offered through securities America advisors Inc. Wealth Management Services and securities America are separate entities. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at anytime based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.