Inflation: The Struggle Is Real - InvestingChannel

Inflation: The Struggle Is Real

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Inflation Around The World 

Amid the higher cost of almost everything, lots of US households have it bad. The Juice will detail just how bad – and exactly who’s hurting most – in a minute, alongside a handful of investment ideas to consider. 

But first, a quick check on European inflation. Yesterday, we told you about the impact of the rising cost of energy throughout Europe. Today, we focus on overall inflation, using both the CPI (consumer price index) and PPI (producer price index). 

What’s The Diff? 

Keeping it simple, the CPI measures the cost consumers pay directly for goods. The PPI gauges the costs incurred by the producers of goods. Given the reality that producers often pass on at least some of their costs to consumers, economists consider PPI a leading indicator of CPI. 

Potentially Bad News For Germany

Source: Trading Economics 

That’s a look at PPI in Germany for July. Up a record 37.2% year-over-year in July. 

Here’s Germany’s CPI –

Up 7.5% year-over-year. 

CPI Is Even Worse In Spain

Source: Trading Economics 

The 10.8% inflation rate is the highest Spain has experienced since 1984. However, PPI came in lower than expected last month at 40.4%. Unlike in Germany, it’s actually on the decline. 

Once Again Turkey Takes The Cake

No country has it worse than Turkey. Inflation there increased for the 14th consecutive month at its highest pace since 1998 – up 79.6% year-over-year.  

Source: Trading Economics 

As The Juice explained in June, these staggering numbers are a function of the collapse of the Turkish lira. 

Given these inflation numbers, we thought we’d take a look at how ETFs that hold equities specific to these three countries have performed over the last year. 

Short answer: Not good. 

Source: Google Finance

Interestingly, the iShares MSCI Turkey ETF (TUR) has been on a relative tear this year. 

Chalk this run up to bottom feeders. Bargain hunters. 

At last check, TUR’s p/e ratio was 5.5. Intriguing, but given the mess Turkey’s in right now, we wouldn’t throw even speculative cash at this ETF. 

Okay. Enough with the rest of the world. Back to the US, where the story’s still bad, but seemingly better.

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Financial Well-Being

Inflation: The Struggle Is Real

Key Takeaways:

  • There’s a stark difference between the financial attitudes and realities of people making less than $50,000 and those earning six figures. 
  • Inflation is clearly impacting US households on the low end income-wise. 
  • The Juice reiterates the best way to play this dichotomy with stocks. 


Source: Morning Consult

The haves and have nots. The dichotomy of American personal finance. 

High earners super confident about their financial well-being, driving around in Teslas they pay untold amounts to lease or finance every month. 

And relatively low earners feeling the pinch of inflation. Maybe struggling to make ends meet. 

Indeed, a good chunk of people making under $50,000 a year say their finances control their lives – 

And only 16% of people making under $50K say they could handle an unexpected expense, compared to 55% of those earning six figures. 

As An Investor Play Both Ends, And The Middle?

This chart says it all – 

Source: Google Finance 

We all need basic goods. We all like to do at least a little discretionary spending, even if we’re not in optimal financial shape. If we’re crushing it, all the better. 

In either case, you’ll find the resilient consumer at Costco (COST). That’s as close to a guarantee as you’ll get in retail stock investing. 

You’ll find the one struggling to make ends meet at the discount dollar stores. You won’t find them – or at least you won’t see them spending as much – at Walmart (WMT) and Target (TGT)

However, there is a relatively affluent category of consumer you might find at Walmart or Target. 

As indicated in Walmart’s recent earnings call – where the company beat analyst expectations – it’s the six-figure earner looking to save a buck on items such as food drawn to the retailer because of its low-cost reputation. They have a budget and might like to pinch a penny here or there, but they’re not in dire straits like so many low earners appear to be. 

The Bottom Line: This said, if you’re a long-term investor, it might make sense to scoop up shares of Walmart and Target on weakness, if you haven’t already. Even though they’re both massive in size and scale, they’re nimble during uncertain times. 

Plus, Target is a dividend aristocrat, having increased its quarterly payout to shareholders for 51 years in a row. Walmart isn’t far behind at 49 consecutive years. So, you get paid to ride out some of the recent downside. 

Taken together, discount retail – on the low end, the high end, and in between – might not be a bad place to be. If you want to take some of the guesswork out of buying individual stocks, consider an ETF. 

Costco and Walmart comprise roughly 15% of the VanEck Retail ETF’s (RTH) holdings. The fund also owns meaningful stakes in Target (4.4%), Dollar General (3.2%), and Dollar Tree (1.8%) as percentages of its overall portfolio. Plus, this ETF gives you broad exposure to retail through names such as Amazon (AMZN), RTH’s top holding at nearly 21%, and #2 holding Home Depot (HD).



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