Today, Jobless claims rise and inflation on the consumer level spike higher than expected, and congress spending caps could trigger tax hikes and budget cuts!
So what this all translates into when talking about the stock market.
With three consecutive months of consumer price index(CPI) rises. Inflation is a big problem and CPI prices are reflecting that. You better be prepared to position your portfolio by investing in the commodities, short term bonds, international currency, buying gold and real assets, will give you a hedge.
Inflation does matter when producers cannot pass it on to the consumer and wages are not going up. This will eventually result into less profit for American corporations and of course will affect the stock market.
Let’s not forget, the stock market has nearly double since the last 18 months and now, companies are going to have a harder time passing along the adversities of inflation thought the buyers, meaning, this requires investors to be cautious and one way to look at hedging your finances is trough health care area because whatever happens people are going to have to continue spending on health. And a lot of companies in this sector offer great dividends.
Companies like (Pfizer) and one you should put on your radar is Medco Health Solutions, Inc (MHS) which would be a good dividend investment to consider buying when the market weakens.
This stock market rally has yet to reflect the issue of rising prices and cuts into profits, how can we continue having the good earnings and great growth in the stock market, if corporate of America cannot raise their prices? Profit margins are definitely going to be squeezed, and this will translate into the Down Jones industrial.