Cpi prices increased by 5.4 in June, marking the highest monthly gain since August of 2008., just as the housing bubble burst and the stock market collapsed., We expected inflation to be bad, but not THIS bad.. The median forecast for month over month, inflation was only 0.5 and we got nearly double that with 0.9 Welcome back to Stock Tricks with Nick. Today Ill be breaking down June CPI report, whether or not those number should worry you, what transitory inflation is and, most importantly, How you can protect yourself. If youre interest, in all things finance from stock trading to maximizing your credit score youve come to the right. Place. Make sure you subscribe and hit the notification bell to keep up to date with all of my videos.. Alright lets get into it.. The June CPI report came out on Tuesday, with higher than expected, inflation. 5.4 year over year and 0.9 from just May to June.. They also measure core CPI, which excludes food and energy that came in at 4.5, increase the most since September 1991., But lets back up what even is inflation.. According to Investopedia, inflation is the decline of purchasing power of a given currency over time. For simplicity, say you go to the grocery store to get your groceries for the week.. This shopping trip costs you 100.. Then, one year later, you go and get the exact same items because youre like me and can only cook 3 meals.. This time your bill comes out to 105.
, The 5 extra dollars or 5 more you paid is the inflation rate.. Inflation has been escalating due to several factors, including supply chain bottlenecks, surging demand, as the pandemic eases and year over year, comparisons to a time when the economy was struggling, the most., But probably the largest factor leading to higher inflation, is the drastic increase in the money Supply in the US. Since February of 2020, the M2 supply has increased by 26. M2 is a measure of the money supply that includes cash checking deposits and easily convertible near money.. That means nearly 21 of every dollar thats ever existed was printed within the last 12 months.. This is the largest single year increase in the M2 supply since 1943. And four years later, in 1947, we had the largest inflation rate in US of 19.7., Its common sense. If you print more money, things are going to get more expensive.. If you print 21 of every dollar, thats ever existed in 1 year, well, youre going to see that flow through to prices. One thing thats supposed to offset the impact of inflation is increased wages.. If the cost of good go up by 5 and your income goes up by 5, then youre not likely to feel the impact.. Unfortunately, wage increases cannot keep pace with the blistering inflation.. A separate report from the Labor Departments Bureau of Labor Statistics said that the monthly increase in consumer prices translated to negative real wages for workers.
The 0.9 month over month, increase in consumer prices far outpaced the measly 0.3 increase in average hourly earnings causing more than 0.5 Hit to the real wages. Even worse, the effects of inflation are significantly worse for poorer people. Higher income. Jobs are more likely to increase salary to cover inflation rise than lower paying jobs.. Also, prices typically increase more for basic needs than compared to luxury items.. This is referred to as inflation inequality., A larger percentage of lower income earners budgets go to these necessary purchases, which now cost more, while high earnings only have to cut back on some of their extra expenses.. Before you hit the panic button, the government has continually assured that a large portion of the inflation that weve been feeling is only transitory. If youve been paying any attention to the inflation news. Im sure youve come across this term., Its a comforting buzzword. That suggests that the sharp rise in prices is just going to be brief or short lived.. Jerome Powell, the federal reserve chair, spoke to the house of representatives financial service committee on Wednesday. Hes, confident that the recent price hikes are associated with the countrys post pandemic reopening and will fade. Saying The high inflation readings are for a small group of goods and services Directly tied to the reopening., His statement suggests, the fed will continue their bond buying and keeping interest rates near zero until at least 2023. To be fair, we are comparing the prices now, while the country is opening back up and pent up.
Demand is surging to last summer when everything was shut down and the economy was weaker.. There have also been supply chain issues, most notably the computer chip shortage, that is reducing the production of new vehicles, which in turn is spiking the price of used vehicles.. That was the case again last month, as used car and truck prices, leaped 10.5 accounting for more than one third of all, the price indexs gains. For the 12 month period used car and truck prices have burst 45.2 higher. Food and energy prices also were up substantially. 0.8 and 1.5 respectively. The gasoline index rose 2.5 in June and is up 45.1 over the past 12 months. Food has increased 2.4 in the past year.. As countries and production bottlenecks open up and the pent up demand subside. We hope to see inflation rates decline and prove transitory., But how long can inflation run at these levels before it isnt considered transitory? Well, no one in the government wants to give any answers on that.. If inflation rates differ by the good or service, how did we even calculate the 5.4 that everyone is freaking out about When people refer to inflation rate chances are they are referencing the CPI or consumer price? Index. CPI is a basket of hundreds of different items that weve been measuring since 1919.. Those items can be separated into 8 different groups. Apparel, like clothing and jewelry Education, amp Communication think school tuition, yikes telephone and internet bills and computer software.
, Food and Beverage, both grocery bills and restaurants.. Housing such as rent mortgage payments for your home utility costs and furniture. Medical care, hospital visits, prescriptions, dental and vision, products., Recreation, Sporting events, toys and pets. Transportation, vehicle purchases or leases, gas, car insurance, airplane and train fares., Other Hairdressing, tobacco, alcohol and, basically everything else., Because Inflation is hard to quantify. There are other measures commonly used.. My personal favorite is The Big Mac Index created in 1986., No Im, not joking, that exists and is relatively popular., Its based on the theory of purchasing power parity, which is the idea that, in the long run, exchange rates between currencies should move towards the rate. That would equalize the prices of an identical basket of goods between two countries. Its, not a joke. Meme from. I think you should leave On this channel. I mostly talk about stock trading, so lets take a look at how the inflation number announcement impacted the markets.. When the report came out on Tuesday morning, we didnt see an immediate impact.. The markets opened relatively flat, as traders digested the meaning behind the numbers.. Then around noon the market had decided to sell off and we closed near the low of the day.. While the indexes held up. Okay, the divergence was apparent., The money was flowing out of the risky stocks and into large tech stocks., Similar to how inflation impacts lower income earners. The smaller riskier companies often feel the effects more.
, No matter how hard the apes held on the meme stocks were hit. The worst with Gamestop dropping 11.5 and AMC falling 22 in just two trading days.. During the same time, Apple made new all time highs and AMZN stayed within 2 from its high.. So if Gamestop and AMC cant save me from inflation and wages, arent increasing fast enough. Keep pace. What can I do? The worst thing to do is keep all of your money in savings account with a bank. Youll earn about 0.01 interest on your money. There. You want to own assets.. This includes blue chip stocks, real estate, crypto, gold and luxury goods. Such as watches wine and PSA 10 Charizard., Anything that will appreciate in value will help offset the impact of inflation.. This is another reason why lower income earners are impacted more by inflation, because they are less likely to own assets.. Another way to hedge against inflation is to pick up two free stocks from Webull, which could be valued all the way up to 2300, when you open an account and deposit 5 with them, using the link in the description. Conclusion, And with that said, thank you. So much for checking out my video.. If you learned anything, do me a huge favor and smash the like button and inflate the subscriber count if., And I want to hear from you in the comments.