April 30, 2022: Inflation update 2

Foreword

This is a quick note, which tends to be just off the cuff thoughts/ideas that look at current market situations, and to try to encourage some discussions.

As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.

If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.

Almost anniversary

Almost a year ago, on June 6th, 2021, I made a post about inflation. In it, I talked a bit about my thoughts on inflation, where I think it was heading, and some potential sectors to invest in if you believed inflation was going to be a problem. I made a follow up on August 30, 2021, clarifying some misunderstandings I hear from talking to people.

Unless you’ve been hiding in the middle of the forest and living off the land, you’ll probably have noticed that inflation has not been kind in the past “almost a year”:

And this is how the sectors I’ve talked about have performed:

Notes:

• The candlesticks are for SPY, the colored lines are each for a sector ETF.
• I’m cheating a little by using XLU. I wasn’t talking about the utilities sector in my prior posts, but “utilities-like” stocks (see the posts for clarifications). But there’s no real “utilities-like” stocks ETF, so I’m using XLU to represent.
• Some people were confused when I say “housing”, thinking I meant “homebuilders”. No, I meant “housing”. Homebuilders didn’t do too well was what I gathered.
• ARKK isn’t really a sector, but a bunch of people have been crowing about how “innovative, disruptive tech” is the best inflation hedge. Yeah…., no.