Investing In Times Of Inflationary Pressure. XTB’s latest report

Inflation represents a change in prices over a period of time and is undoubtedly one of the main factors affecting the economy. The inflation rate is also one with the most important indicators for both consumers and investors. It determines the real value of cash and the value of the investment, which changes over time. The dynamically fluctuating inflation rate poses a significant challenge for investors, and its influence on the stock exchange indices and gold prices is considerable.

The pandemic and inflation

The restrictions related to the COVID19 pandemic have brought the global economy into a deep recession; oil prices have temporarily dropped even below zero. Central banks have openly talked about the necessity to counteract deflation. However, the macroeconomic situation has changed in recent months, driven by countries’ increasingly better coping with the pandemic.

All over the world, central banks have been surprised by the strength of the recovery and the rise in costs that encourage firms to raise their prices. Interventionism, which saved the global economy from collapse, resulted in households sometimes having higher incomes than if the pandemic had not happened at all. At the same time, the free money policy encouraged investors to look for alternatives to cash, which had a significant impact on the prices of raw materials driving up the further costs for companies. How should investors behave in such a situation?

– In this report, we focus on inflation in the USA, because it will determine the Fed’s policy, which in turn is of the key importance for global markets. We show which inflation-related indicators should be monitored and which publications on inflation data is the most important. We also answer the key question that both professional investors and households ask themselves – will the inflation rise? – adds Przemysław Kwiecień.

Five reasons for rising inflation

When building an investment portfolio, every investor should take into account a number of factors that may affect the overall effectiveness of investments. Inflation undoubtedly belongs to this group. XTB analysts distinguished five indications in relation to the US economy that may indicate a further increase in the inflation rate:

1. Substantial money transfers – Due to direct subsidies, special unemployment benefits, and other forms of support, US households have more money than if the pandemic had never happened.

2. Huge cumulative demand – Consumers were unable to spend money on many goods and services due to constraints – now they may want to make up for lost time and spend their resources when the economy opens.

3. Rising commodity prices – Not only is crude oil more expensive, but copper, cotton and grain prices are also rising – partly because of zero interest rates – investors treat these assets as investments.

4. Costs related to COVID-19 – as the economy opens up, the sanitary regime will be maintained, which entails higher costs.

5. Less competition – due to lockdown, some companies closed down permanently, especially in the area of ​​services. Less competition means a higher pricing power.

Further details on investing in the times of increased inflationary pressures can be found in the report available on this page.

 

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Media contact:

Piotr Dobosz
PR Manager XTB
tel.: +48 668 121 754
piotr.dobosz@xtb.com

About XTB Group

XTB Group consists of companies with one of the largest stock exchange-listed FX & CFD brokers in the world. XTB Group has entities regulated by the world’s biggest supervision authorities including the FCA, CySEC and KNF. With more than 15 years of experience, XTB Group provides retail traders instant access to hundreds of global markets. XTB is a fintech company based on trust, technology and support. Since 2002, XTB Group has expanded to 13 major markets in Europe, Latin America and Asia, attracting over 275,000 clients. Operating the company’s own award-winning xStation platform and XTB Mobile app, the entities of XTB Group offer over 1,500 instruments, including forex, indices, commodities, stock and ETF CFDs. Through X-Open Hub, XTB provides leading technologies for financial institutions from around the world. Find out more at www.xtb.com