Globally producer price indexes have turned down quite decisively. China is trying to deal with deflation.
There are two main explanations, with diametrically diverging investment outcomes.
Under the first scenario, producer price inflation is a leading indicator for consumer price inflation. Falls in the producer price indexes will inevitably flow through to inflation indexes. Sell stocks, buy bonds.
Under the second scenario, the gap is an indicator that companies continue to be able to expand margins. It is a sign that companies are raising prices to consumers faster than their own costs are growing. Buy stocks
In this week’s podcast, Nucleus Wealth’s Chief Investment Officer Damien Klassen and Senior Financial Adviser Samuel Kerr dig into the arguments and look at the evidence..
Agenda:
Can’t make it to the live series? Catch up on the content via Podcasts or our recorded Videos.
Samuel Kerr is a Senior Financial Adviser at the MacroBusiness Fund, which is powered by Nucleus Wealth.
The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Samuel Kerr is an Authorised Representative of Nucleus Advice Pty Limited, Australian Financial Services Licensee 515796. And Nucleus Wealth is a Corporate Authorised Representative of Nucleus Advice Pty Ltd.