A Comment -- General Comments From an Expert (A Commentary)

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Deferring Consumption. Sometimes we have heard individuals say that investing in the market (maybe less so this year) is like getting money for free, but in reality, the trade-off is time. When an individual invests in a company expecting to share in the profits and economic value add from that company, they risk losing both their capital and their time, but they take part in an opportunity to safeguard their wealth against inflation. Whereas, if an individual decides to avoid investing in the financial markets and instead chooses to immediately consume their dollars via goods or services, they do not risk their time or capital, but they forego the opportunity to increase their wealth against inflation. By investing in the financial markets and choosing to have a low time preference, an individual can earn a return that allows them to consume more goods and services into the future, above the rate of inflation. This is at the core of investing. Unlock Premium - Try 5i Free

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Inflation Components and Future Expectations. A rough outline of the CPI weighting towards each good and service. Food represents about 1/6th of the total CPI weighting and has been a major source of stickiness in the recent elevated inflation readings. Energy represents about 1/10th of the inflation index and has been a major contributor to elevated inflation readings, however, this has recently been declining with the fall in oil and gasoline prices. Housing represents about 1/3rd of the index and often lags other asset prices. Just under half of the index is made up of vehicles (new and used), transportation, healthcare, and apparel, which have all been contributors to high inflation, but we consider these as much more elastic to fluctuating input costs (raw materials). While we note we expect some of these components to continue rising modestly, this would be at a lower annual rate of 2-4%, as opposed to the large increases of 5%+ that we have seen of late. We believe that energy will continue to see downward pressure in the coming year, and this will be reflected in lower producer costs, and in turn cause consumer prices to decline across vehicles, transportation, healthcare, apparel (43% of total CPI). Unlock Premium - Try 5i Free