With the first few years of the 2020s experiencing an uptick in inflation, particularly compared to the 2010s coming out of the Great Recession, a recent analysis by ResiClub (Inflation in the 2020s | resiclubanalytics.com) looked at how inflation compared to recent decades.
In the first chart, you will see that inflation in the decade of the 2020s has already outpaced the entire decade of the 2010s (21.1% vs. 19.0%, respectively).
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Source: RSWA created using Bureau of Labor Statistics CPI: All Urban Consumers Data
In the next chart, you will see that the 2020s has a higher pace of inflation in the first 52 months compared to the 1990s, 2000s, and 2010s but is still quite a bit behind the 1980s (21.1% vs 34.3%).
.png?width=624&height=300&name=FAI%2005.31.24%20(2).png)
Source: RSWA created using Bureau of Labor Statistics CPI: All Urban Consumers Data
If we include the 1970s, the chart axis becomes a little difficult to see but inflation rose 104.0% that decade:
.png?width=624&height=301&name=FAI%2005.31.24%20(3).png)
Source: RSWA created using Bureau of Labor Statistics CPI: All Urban Consumers Data
When we look at the pace of inflation in the 2020s compared to the 1970s through the first 52 months of each decade, they track closer, however, the 1970s saw a surge in inflation in the second half of the decade.
.png?width=624&height=291&name=FAI%2005.31.24%20(4).png)
Source: RSWA created using Bureau of Labor Statistics CPI: All Urban Consumers Data
Although the 1970s saw inflation for a variety of reasons, including an oil embargo, this is what the present-day Federal Reserve is trying to prevent by keeping interest rates higher for longer.
We thought it might be interesting to project where inflation may end up in the 2020s decade, so we annualized three different inflation scenarios going forward, crudely annualizing projections of 2.0%, 2.5%, and 3.0% inflation for the rest of the decade:
.png?width=556&height=264&name=FAI%2005.31.24%20(5).png)
Source: RSWA created using Bureau of Labor Statistics CPI: All Urban Consumers Data
With the Federal Reserve targeting 2.0% annualized inflation, even if inflation remained at that rate for the rest of the decade, we are likely to outpace inflation in the decades of the 1990s and 2010s but still trail the 1980s and 1970s.
Peak Nostalgia: Keeping the theme of the decade going, the Washington Post analyzed a recent survey of adults who answered questions about which decade has the best and worst music, movies, economy, etc. across 20 different measures. What they found was that nostalgia for things consistently peaks at certain ages and typically when we are younger (between ages 4-16). We will typically associate the best music of our lives when we are 16-19. I looked back at some lists of songs when I was that age, and I could still sing most of them by heart. The peak of nostalgia at around 16 could be related to outside influences, like say being forced to go get a job, maybe? (“Mom, who is FICA?!”) The study also found that across the board, people seem to think things are worse now than ever, consistently. Overall, an interesting survey. America’s best decade, according to data | The Washington Post
T + 1 = US: As we mentioned earlier this year, effective May 28th, trade settlement for US equities and bonds is now the trade date plus one day for settlement, meaning funds will be available as cash one day after trades are placed. Trades previously settled trade date plus two days, so this is a faster clearing process and better for investors. There may be hiccups initially, however, testing has been in place since August 2023. New Era of Faster Trade Settlement | msn.com
Financial Planning/Investment Strategy Corner:
Housing Inflation and Outlook: Returning to Resiclub’s inflation analysis, home prices since the beginning of 2020 have risen 47.1% versus 20.7% in overall inflation (Inflation in the 2020s | resiclubanalytics.com). The last time US home prices rose slower than overall inflation was in the 1990s when they rose 30.1% vs. 33.7%. With the Federal Reserve raising interest rates quickly in 2022, directly impacting the costs of a mortgage, the housing market saw a fall in existing and new home sales and as a result, the sector fell into a recession. What the US housing sector did not see was a decline in home prices, with prices increasing due in part to a lack of supply. Charles Schwab recently released a report on housing that shows the housing sector may be recovering: Housing Holds Some Economic Keys | Charles Schwab. They point to home builders gaining confidence and single-family home sales and new home sales rising 9% and 22% since the trough. Prices have also increased with sales, however, at a more reasonable pace than in the past few years, pointing to a more stable market. This appears to be the trend in Maine with home sales showing an increase in sales volume: Maine home sales jump 17.5% in April, fueled by greater inventory | Mainebiz.biz. Median prices rose an average of 3.95% from a year earlier. With US investor's wealth tied to home ownership, stability in the sector could lead to the US continuing to fight off a recession and rates remaining higher, however, keeping housing affordability at all-time lows. Another concern may be homeowners who have adjustable-rate mortgages which are now adjusting to higher interest rates: US Homeowners With Adjustable-Rate Mortgages | Bloomberg. This may add to the supply of existing homes for sale if mortgages are unaffordable at higher rates. Before selling, homeowners may be able to work with their lending institution to adjust the terms of any existing loan.
Quick Hits:
- Maine agritourism doubles from 2017 to 2022: Charms of the farm: Maine agritourism is thriving | Mainebiz.biz
- With the Lewiston Ballon Festival on hiatus, here’s a list of Maine fairs and festivals: 2024 Maine fairs & festivals | centralmaine.com
- Returning Art: Meet the man causing cracks in the antiquities trade | economist.com
- If I ever found myself up late watching Pac-12 basketball, Bill Walton was my favorite announcer: Jay Bilas remembers Bill Walton the basketball player, the man and friend - ESPN
Quote: “Life is about growth. People are not perfect when they're 21 years old.” – Bill Walton
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