Macro Observations

A big reason why inflation spiked globally in 2021 and 2022 was due to supply chain disruptions. The Red Sea conflict is creating another imbalance that puts the current economic growth cycle at risk. I suspect that companies now having to pay double and triple the shipping costs are going to try to pass those costs on to consumers again. The problem this time around, however, might be that they don’t have the capacity for it.

It probably goes without saying that China has one of the least attractive economic backdrops in the world today. If Chinese stocks have fallen significantly over the past three years, it probably stands to reason that we’ve seen commodity prices falling over that same time. Most people in the markets expect a slow drawdown in inflation, but there’s a possibility we could see a second wave of inflation just like we did in the late 1970s. Commodities could be the trigger for it.

The financial markets are and have been arguably the greatest wealth creation tool ever. Over enough time, stocks, bonds and other assets have proven to do a very effective job at producing total returns that stay ahead of inflation and create financial independence for investors. The problem is that most people don’t stick with it long enough to enjoy the benefits.