A Bull Trap Or A Rebound?

in #blog2 years ago

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Markets have rebounded recently but is this a dead cat bounce or the start of a recovery? One thing that is certain is that inflation is here. 7% inflation print in December 2021 - that is a heck of a lot. Can you imagine if you had $100 at the end of 2020 and it only had a purchasing power of $93 after a year. So if your wage increment was less than 7%, your wages aren't keeping up.

But you may not feel it if you aren't spending all of your paycheck. Like if you only spend 50% of your salary typically, you will only notice it if your savings aren't increasing as fast. And this takes a longer time than if you couldn't afford goods at the store.

So while there will be attempts to cool inflation, I don't think there's the political will like there was in the 80s when interest rates were in the 10% region even in developed economies. The only solution that is apparent to me is to keep buying assets and using those returns to buy even more assets. Saving cash for good purchases is good but if you keep it on the sidelines for too long, it will get eaten up by inflation alone.

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