Some bloggers spend their time looking at bond yields for clues to inflation and if that were your only lens to inflation, you would have been woefully wrong this entire past year because bond yields barely moved indicating little or no inflation but we all know that inflation for 2021 was a whopping 7 percent.
The big question is if inflation will continue in 2022 so let’s take a look at the lens that really matters, the business lens. Procter & Gamble, Heinz and Kimberly-Clark are but a few companies that have reported earnings recently. The Fool did an excellent comparison between P&G and Heinz and their ability to raise prices and retain market share. P&G did well raising prices but Heinz did not and if you wonder why you should consider the types of goods that each sells and which one consumers consider more essential than others and the numbers speak for themselves.
Unfortunately, Kimberly-Clark did not manage well through high inflation, supply chain issues and pandemic uncertainty and cautioned that things may not go well in 2022. If businesses are warning that inflation is going to be bad in 2022 then perhaps we should listen and plan accordingly.
Church and Dwight have earnings coming out January 28 but the company has been added to the dividend aristocrat list recently and that bodes well for the firm but we’ll see how they are dealing with inflation. Apple’s earnings will be out Thursday January 27 and that too will be informative.
Lastly, the Fed has their announcement this week that they are not raising interest rates now but may in the future. And while everyone is talking about the Fed’s language, no one is paying attention to what the Fed will really look at this Friday and that’s the employment cost index that will really tell the tale of wage inflation and what may be to come in 2022. Key an eye out for that report, it will be very telling for any prudent investor.
Stay tuned and stay solvent…