The Smart Investor
    Facebook Instagram
    Sunday, December 10
    Facebook Instagram LinkedIn
    The Smart Investor
    • Home
    • About
      • About Us
      • Careers
    • Smart Investing
      • Getting Started
      • Investing Strategy
      • Smart Analysis
      • Smart Reads
    • Special Free Reports!
    • As Featured on BT
    • Our Services
      • Our Services
      • Subscribe now!
    • Login
    • Cart
    The Smart Investor
    Home»Kuo’s Smart Take»Smart Thought Of The Week: Blame-game
    Kuo’s Smart Take

    Smart Thought Of The Week: Blame-game

    David KuoBy David KuoApril 26, 2023Updated:October 6, 20233 Mins Read
    Facebook Twitter LinkedIn Email WhatsApp
    Smart Thought Of The Week
    Share
    Facebook Twitter LinkedIn Email WhatsApp

    It is worrying when someone as erudite as the chief economist of the Bank of England warns that Brits need accept that they are now poorer. He was talking about the impact of inflation on household wealth.

    Inflation is not just a UK problem, but it is something that people the world over are facing on an almost daily basis.

    Huw Pill has laid the blame of inflation over the last 18 months on pandemic supply disruptions, and household support programmes that has boosted demand.

    He also blamed the Russian invasion of Ukraine that resulted in a spike in European energy prices. Oh yes, he also blamed adverse weather conditions, and an outbreak of avian flu that has driven up food prices.

    Anything else you want to throw into the mix, Huw? What about a lack of labour mobility, Brexit, and maybe protectionism?

    Understandably, Huw Pill chose to steer clear of anything too controversial or politically sensitive. But he did urge workers to show restraint in pay discussions.

    He said that people should stop trying to maintain their real spending power by bidding up prices, whether through higher wages or passing on higher costs to customers, etcetera.

    Huw Pill is right up to a point. We could easily get sucked into a deadly inflation vortex if we are not careful. But he somehow conveniently chose to ignore the root cause of inflation. Perhaps it is because it hits too close to home. Perhaps it touches a raw nerve. Point is inflation is cause by too much money chasing a limited supply of goods and services.

    And the reason why there is too much cash swirling around the global economy is because central banks printed too much of the stuff in the first place through Quantitative Easing. What’s more, they didn’t at that time – and they still don’t now – know how to withdraw the cash without creating financial havoc.

    The harsh reality, therefore, is that inflation will probably be with us for a long time. We might need to learn how to live with higher prices and, in turn, how to cope with higher interest rates for a protracted period. From an investor’s perspective, there are obvious implications.

    Stock markets could remain subdued as valuations are capped by higher interest rates. After all, share prices are inversely related to interest rates.

    But not all shares may be impacted in exactly the same way. Share prices apart from being affected by interest rates are also a function of earnings. Consequently, companies that can demonstrate an ability to grow their earnings per share could be suitably rewarded.

    So, look for companies that can grow their earnings. Those are likely to be businesses that have pricing power. That will become an increasingly important attribute as we go through a period of slower economic growth and higher inflation.

    If you’d like to learn more investing concepts, and how to apply them to your investing needs, sign up for our free investing education newsletter, Get Smart! Click HERE to sign up now. 

    Get more stock updates on our Facebook page. Click here to like and follow us on Facebook.

    Disclosure: David Kuo does not own any of the shares mentioned.

    Share. Facebook Twitter LinkedIn Email WhatsApp

    Related Posts

    (TSI) stock market, magnifying glasses

    Get Smart: The Best Stock Portfolio for Yourself

    December 10, 2023

    Top Stock Market Highlights of the Week: Singapore Retail Sales, CPF Interest Rates and CRISPR

    December 9, 2023
    Lendlease - JEM

    4 Singapore REITs That Could Enjoy Higher DPU in 2024

    December 8, 2023
    Facebook Instagram LinkedIn Telegram
    • Careers
    • Disclaimer & Privacy Policy
    • Subscription Terms of Service
    © 2023 The Smart Investor. All Rights Reserved. The Smart Investor, thesmartinvestor.com.sg, an investment education website managed by The Investing Hustle Pte Ltd (Company Reg No. 201933459Z) is not licensed or otherwise regulated by the Monetary Authority of Singapore, and in particular, is not licensed or regulated to carry on business in providing any financial advisory service. Accordingly, any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice. No information is presented with the intention to induce any reader to buy, sell, or hold a particular investment product or class of investment products. Rather, the information is presented for the purpose and intentions of educating readers on matters relating to financial literacy and investor education. Accordingly, any statement of opinion on this site is wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader. The Smart Investor does not recommend any particular course of action in relation to any investment product or class of investment products. Readers are encouraged to exercise their own judgment and have regard to their own personal needs and circumstances before making any investment decision, and not rely on any statement of opinion that may be found on this site.

    Type above and press Enter to search. Press Esc to cancel.