Inflation Could Look Even Worse This Week; Russia Still Has Logistical Issues

by Greg Valliere, AGF Management Ltd.

Insights and Market Perspectives

THE U.S. ECONOMY — and the jobs market — are red hot, but that doesn’t generate headlines. The only economic story that seems to matter is inflation, which may look even worse after new reports this week.

TUESDAY’S CPI REPORT COULD SHOW a huge March increase — consensus is for an 8.4% rise, year-over-year, up from a 7.9% rate the previous month. Wednesday’s PPI report may also show a rise of about 8%. This almost certainly will prompt the Federal Reserve to hike rates by 50 basis points at its May 3-4 FOMC meeting.

THIS WILL HAVE AN IMPACT ON FISCAL POLICY AS WELL: The idea of a big new spending package is becoming less and less likely; doing anything that would exacerbate inflation has little political support. Democrats are scathing, in private, toward inflation hawk Larry Summers, but he’s been largely correct, and his views are dominant now.

THE UNEMPLOYMENT RATE, now at 3.6% — with record low weekly unemployment claims — has generated virtually no attention. Unless inflation and yields suddenly decrease this summer, Democrats face a Nov. 8 smackdown, losing the House and possibly the Senate as well.

ONE GLIMMER OF HOPE FOR BIDEN: A new ABC News poll shows that Vladimir Putin gets most of the blame for high gasoline prices, followed closely by oil companies. The Biden Administration gets some blame for high gas prices.

BUT SURGING FOOD PRICES AND INFLATION IN GENERAL are blamed on Biden — who faces a rough week on inflation, the illegal immigration mess, surging gun violence, and a sense that the U.S. hasn’t done enough for Ukraine.
* * * * *
A NEW GENERAL has been appointed to head the Russian war in Ukraine — Alexander Dvornikov, who ran the brutal Syrian campaign that killed thousands of civilians. But a new commander may not necessarily make a major difference; analysts reported this weekend that Russian progress has been slow in the Donetsk and Luhansk regions.

AS WE PREDICTED ON FRIDAY, long supply lines now entering eastern Ukraine seem to be sitting ducks, continuing a pattern of extremely inept Russian logistics. The poorly prepared Russian troops will now encounter the highly motivated Ukrainians.

UKRAINE HAS SUPRISINGLY STRONG AIR SUPPORT and enough NATO and U.S. supplies to hold off the Russians for months to come. The likelihood of continued fighting will have a ripple effect on global food and fuel supplies — and prices — well into the summer.

A WILD CARD, OF COURSE, WOULD BE A VICTORY by Marine Le Pen in two weeks, which would be a crushing blow to NATO. We think Emmanuel Macron will prevail by a narrow margin — and then he will focus almost exclusively on winning a truce between Ukraine and Russia later this spring.

 

 

 

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

©2022 AGF Management Limited. All rights reserved.

This post was first published at the AGF Perspectives Blog.

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