Was the Plan To Get Punched in the Mouth?

  • 060622
  • 3 minutes

To Mike Tyson's presumed delight, the price for majestic felines and colossal hibernatory mammals barely fluctuated over the last couple of years. Yet, for those in want of VIP access to the exotic pet market, there's been a spike in the cost of more mundane things, like gas and groceries.

On the (hopefully) tail end of a pandemic that has subtly toed our country's economic scale, people are finally starting to leave the house again—only to be greeted by another heartache at the gas pump. April's Consumer Price Index (CPI) 12-month projection of 8.3% is a meager drop from March's measurement at 8.5%. A step in the right direction but still not ideal as we continue to see the highest rates in nearly 40 years.

The reason for such a phenomenon certainly is contentious, with analysts tossing in political buzzwords like government stimulus and corporate greed. But there are a few factors generally agreed upon, not the least of which is the general shift of consumer needs and demands—in large part due to the aforementioned hopefully-nearing-an-end pandemic. The others—things like increasingly volatile crude oil prices and a supply chain catastrophe—play a part domestically with a significant influence from exporters abroad.

The above 12-month CPI projection finds its sum in a year-old pitch against prices. Back then, many of us spent most of our time sitting at home, not necessarily tuned to any rising costs unless Netflix changed their subscription rates. At that point, this inflationary era was emergent.

But where does it all come from? It seems we're still unsure, relying on consensus banalities, hypotheses from Twitter-based investment specialists, and political go-getters with a flair for demonizing.

Regardless, we know that this process was underway before the country closed shop. The pandemic only made matters worse, instigating a dramatic shift in consumer needs and altering the hierarchy within our goods-and-services market structure. It comes down to the classic supply-and-demand model taught in any intro-level econ course. No one could see a movie or get a haircut (Flowbee users notwithstanding), but everyone abruptly turned into makers. Thus, lumber prices spiked for a month until we learned that passion does not a stable shelving unit make.

Independent of where we landed, it's important not to diminish the hit many are still enduring. Again, we're seeing the highest increase in prices for many industries in nearly half a century. At that time, models used for practices such as retirement planning didn't account for such a climb. Accordingly, some will tighten their budgets or return to work, while others will need to do both. Heck, even Tyson came back when he saw the money on the line. His pithy maxim rings true: "Everyone has a plan 'til they get punched in the mouth."

The spike has hit everyone at home, but each industry has had additional pains, and many are experiencing an amplifying ripple effect. Restaurants, for example, have found themselves marginalized in family budgets nationwide. Their costs rose significantly and found the natural path down to cash-strapped patrons, who, in turn, are pushed to be more penny-wise. So we steel our neglected knives and catch vintage episodes of the Galloping Gourmet, this time for more than just indulgence. Boeuf Bourguignon never looked so good.

That aside, there are other markets to watch that will make intriguing strides to repair damage and keep consumer demand as high as possible. Nevertheless, some will hold fast to aging technology, resisting the lure of tech giants' siren songs. Others may pare down memberships and streaming service "needs" as those transform into luxuries.

The above is all to say, our market economy is strange, being unpredictable and likely to remain so. Still, we can strive to thoughtfully observe our present and heed lessons from the past. While this inflationary era works to abide, Tyson will traverse his big-cat odyssey while we take the road less traveled, simply because there are far fewer tolls. Punch that ticket, Big Mike.

The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Beacon Advisory or Lincoln Investment. The material presented is provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. Past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss.