Weekly Market Update with Brian Ransom 29 October 2021
Welcome to the weekly market update from Signature Wealth Management. I’m Brian Ransom, Research Director from Signature Wealth and here’s what happened in the market this week.
With the market pulling back 5% in September, the month of October has been the exact opposite rallying back to all-time highs. In the short term, the market appears to be trading sideways following the strong rally over the last few weeks.
In the news this week, Tesla market value surpassed $1 trillion with rental car company Hertz ordering 100,000 Tesla vehicles for their inventory. President Biden pays a visit to Congress to help negotiate the two infrastructure packages. And Jack Dorsey, CEO of Twitter, had the financial internet in an uproar last Friday saying, “hyperinflation is going to change everything. It’s happening.”
So I wanted to spend a little time talking about hyperinflation since that term is getting tossed around a lot these days. First, a little inflation is defined as the increase in prices of the average consumer goods and services over a period of time. A bottle of Coca Cola that once cost $1 would cost $1.25 after 25% inflation.
Mild inflation is considered healthy for the economy, typically in the range of 2-3% annually. Increased prices in small increments mean increased returns for companies, which become more valuable with higher earnings. This subsequently increases the capacity to pay higher wages to workers which further encourages positive feedback purchasing. 2% inflation per year would mean a $1 bottle of coke would cost $1.22 in 10 years. With 5% annual inflation, like we’ve seen over the last few months, a bottle of coke would cost $1.63 over the same timeframe. This level of inflation over 10 years would be moderately uncomfortable for consumers and the economy.
This… is hyperinflation. Hyperinflation, is defined as 33% inflation or more per year. This dwarfs the level of inflation we’ve been seeing recently and a bottle of coke would cost over $17 in 10 years. This would be disastrous and probably mean the end of society as we know it. So when folks claim “Hyperinflation is here,” that is a gross exaggeration of the situation we currently find ourselves in and is nowhere close to reality.
For more information on this topic or a variety of other topics including market updates, financial planning, and wealth management please like, subscribe, and follow and we’ll see you next week.
FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved October 28, 2021, from FactSet Database
Signature Wealth Management Group is registered as an investment adviser with the SEC. Signature Wealth only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.
Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.
Information contained herein does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. The use of words such as “will”, “may”, “could”, “should”, and “would”, as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.
Information is not an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein.
The S&P U.S. Style Indices measure the performance of U.S. equities fully or partially categorized as either growth or value stocks, as determined by Style Scores for each security. The Style series is weighted by float-adjusted market capitalization (FMC), and the Pure Style index series is weighted by Style Score subject to the rules described in Index Construction.
All information presented prior to an index’s Launch Date is hypothetical (back-tested), not actual performance. The Index returns shown do not represent the results of actual trading of investable assets/securities. S&P Dow Jones Indices LLC maintains the Index and calculates the Index levels and performance shown or discussed, but does not manage actual assets. Please refer to the methodology paper for the Index, available at www.spdji.com for more details about the index, including the manner in which it is rebalanced, the timing of such rebalancing, criteria for additions and deletions, as well as all index calculations.