Inflation on the Horizon?

Just a short note today. This week we saw bond prices tumble as yields continued to push higher, with the benchmark 10 Year US Treasury yield closing at 1.34%. Commodity prices continued to extend their recent gains. Copper prices gained over 7% and WTI Crude gained 5% by mid-week before giving back those gains over the past two sessions. We may be seeing the beginnings of inflationary pressure start to emerge in the market, which would have negative implications for both bond prices, and potentially causing some tremors in the stock market. Many of the leading stocks over the past 5 years have been technology companies which benefit from low interest rates. Most participants in the market still feel that the Federal Reserve is in charge of this market and that they will be able to maintain their control over interest rates. However, if inflation does start to flare up sooner than they expect or want, we may see dramatic moves higher in interest rates, which is not what anyone in Washington wants to see right now.

Much of this may be off in the future, but that doesn’t stop the market from getting nervous now. The moves in rates this week and commodities can help explain the underperformance of the Nasdaq 100 index, which shed 1.6% this week. The commodity market may, for the time being, be getting a bit ahead of itself, but longer term the wind should be at their back with large spending packages being tossed around in D.C.   

Thanks for reading,

Zach and Dave

   Disclosures

All opinions are subject to change without notice. Neither the information provided, nor any opinion expressed, constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.  Tax laws are complex and subject to change. Calibrate Wealth LLC, does not provide tax or legal advice respect to the services or activities described herein except as otherwise provided in writing by Calibrate Wealth. Individuals are encouraged to consult their tax and legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account.

This material does not provide individually tailored investment advice. It has been prepared without

regard to the individual financial circumstances and objectives of persons who receive it. The strategies

and/or investments discussed in this material may not be suitable for all investors. Calibrate Wealth

recommends that investors independently evaluate particular investments and

strategies, and encourages investors to seek the advice of a Financial Advisor. The appropriateness of a

particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Investing in commodities entails significant risks. Commodity prices may be affected by a variety of

factors at any time, including but not limited to, (i) changes in supply and demand relationships, (ii)

governmental programs and policies, (iii) national and international political and economic events, war

and terrorist events, (iv) changes in interest and exchange rates, (v) trading activities in commodities

and related contracts, (vi) pestilence, technological change and weather, and (vii) the price volatility of a commodity. In addition, the commodities markets are subject to temporary distortions or other

disruptions due to various factors, including lack of liquidity, participation of speculators and

government intervention.

Foreign currencies may have significant price movements, even within the same day, and any currency

held in an account may lose value against other currencies. Foreign currency exchanges depend on the

relative values of two different currencies and are therefore subject to the risk of fluctuations caused by

a variety of economic and political factors in each of the two relevant countries, as well as global

pressures. These risks include national debt levels, trade deficits and balance of payments, domestic and

foreign interest rates and inflation, global, regional or national political and economic events, monetary

policies of governments and possible government intervention in the currency markets, or other

markets.