Inflation's Powerful Impact

For the holiday weekend, Consuelo Mack devoted the WealthTrack program this week to a detailed discussion of inflation.  As the lead reads, "It's been four decades since inflation has played such a powerful role in the economy and markets."  There are a lot of reasons -- and theories -- for the inflation we have now but the supply chain crisis is the one I agree with most.  Ukraine runs a close second, the labor shortage a third. Let's see if this program agrees or points out something new.  Enjoy your holiday.  

Inflation's Powerful Impact

September 1, 2022

Dear WEALTHTRACK Subscriber,

It's been four decades since inflation has played such a powerful role in the economy and markets. How inflation goes will have a big impact on the level of interest rates, economic growth and the direction of the financial markets.

It took then Federal Reserve Chairman Paul Volcker two back-to-back recessions in the early 1980s to slash inflation from more than 13% when he took office in 1979 to under 4% when he left the Fed in 1987.  To tame inflation the Fed nearly doubled its benchmark federal funds rate from an average of 11% in 1979 to 20% in 1980,  sending the U.S. economy into the severe ‘81/’82 recession and unemployment soaring to nearly 11%.  

Today central banks around the world have their work cut out for them. Global inflation rates are running far above the target inflation rates set by central banks. The U.S., the eurozone and U.K. are prime examples with high inflation and low targets. Countries like Poland, Russia and the Czech Republic are under extreme pressure with extraordinarily elevated inflation. The two exceptions, China where inflation is running below its target rate and Japan where they are about equal, are at the opposite end of the spectrum. 

This week’s guest says inflation is the key to the economy and markets. He is Jack McIntyre, Portfolio Manager with Brandywine Global Investment Management where he oversees the firm’s global fixed income strategies. He has been Co-Portfolio Manager of the flagship BrandywineGLOBAL-Global Opportunities Bond Fund since 2012. Rated four-star bronze by Morningstar the fund has a history of beating the market and its Morningstar World Bond category since its 2006 inception.  McIntyre and his team focus on finding high real yields, that’s after inflation, in global bonds and currencies, with an emphasis on government bonds. 

McIntrye says the direction of the economy and markets is now all about how inflation is controlled. We’ll discuss how he is investing as that dynamic plays out.   

In our EXTRA feature,  McIntyre explains how understanding the relationship between the U.S. and China has simplified his job as a global manager.  

If you miss the show on public television, you can watch it on our website over the weekend, along with all of our past programs and our guests’ One Investment recommendations. You can also find the WEALTHTRACK podcast on Stitcher and SoundCloud as well as iTunes and Spotify.

Have a relaxing Labor Day weekend and make the week ahead a healthy, profitable and productive one!

Best regards,

Consuelo