The big news today is a market sell off across most indices. The other big news is the big Powell quote:
it’s a good time to retire that word and try to explain more clearly what we mean.”
Source: Bloomberg
Both the market sell off and the Fed’s plan to deal with it caused the sell off.
The plan now seems to be “do something” about inflation which will mean bad news from consumers. Either interest rates will climb to fight inflation meaning the cost of borrowing will go up or inflation will continue meaning the costs of goods and services will continue to go up.
If you are a borrower (credit cards, student loans, car loans, etc), then things will get more expensive for you. If you are a consumer of things like electricity, groceries, etc. then things will likely cost more for you too. If you are both then things will become very challenging.
The remedy for this conundrum is to generate higher levels of income to offset higher borrowing costs and persistent inflation. Asking for a raise at work, having a side gig, having real estate rentals (and raising rent prices), or financial instruments that generate income like dividend stocks or high yielding bonds.
Today’s market sell off gave us an opportunity to open a small position in a new stock, BHP. We’ll write more in a future post about this but we saw this as a good opportunity to buy the stock.
Disclosure: Member(s) of the Econonaut hold position(s) in BHP as of the time of this article post.
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