Sadly, we don’t presume to know. The big argument today is whether the large burst of “inflation” in 2021 is “transitory.” We would lean to “transitory” but with a very low confidence level. Even therein, what is the proper definition of transitory—six months, one year, three years? No one knows.
We do, however, feel confident in saying that the Federal Reserve Board, which bases its policy decisions on a very tenuous balance between employment and “inflation,” has made and will again make major policy errors by relying heavily on “inflation” numbers as calculated. The concept of “inflation targeting,” whereby the Fed can maneuver inflation to a certain level and then stop it right there, strikes us as full of hubris and quite dangerous. Be on the lookout for potential mistakes that may result from inflation targeting overconfidence.
If nothing else, we hope that the next time you hear a chattering head talk about “inflation,” your new immediate response is: “It’s just not that simple!”
Jay M. Weinstein, CFA, is a managing director at Wealthspire Advisors.