Runaway Inflation and The Perfect Storm of Investing Now Causing a Lot of Stress

While the Global Economy Faces it’s Biggest Test since World War II

I got a simple question for you. Are you stressed? So's everybody else. 72%. They're not merely saying they're stressed. They're specifically saying they're stressed about their finances. That's an all-time high. And the reason is that we have other all-time highs - US inflation, 8.6% in May, an all-time high. The highest level since 1981. Energy costs up 35% from last year. Groceries are up 12%, the biggest increase since 1979. Airplane tickets are up 37%, 13% in just the past month. 

And the Department of Labor says inflation is going to keep rising. Higher demand? Well, it's because we're all emerging from COVID. Ukraine, meanwhile, is reducing supply. It's very hot as well. No rain diseases, damaging crops and livestock. All this is hurting farmers and ranchers and reducing their output. Fewer Americans are employed right now than before the pandemic that's causing employers to raise wages.

All of this is a perfect storm hitting the global economy and I do mean global. The World Bank says the global economy might suffer 1970s style stagflation, weak growth, rising prices. We haven't seen this since the 1970s. The World Bank thought the global economy would grow 4.1%. The bank has revised. It says, no, the global economy is not going to grow 4.1%. It's only going to grow 2.9% and could fall to zero. Europe says a recession could occur there. We've got a lack of grain exports that's hurting Lebanon, Egypt and Somalia. 

China is suffering from its zero-covid policies and falling real estate prices. China's economy is the worst since 1990. In Sri Lanka, they just defaulted last month on foreign debts for the very first time. It's expected that other countries are going to default as well. Add it all up. The head of the International Monetary Fund, the IMF, says the global economy is facing its biggest test since World War II. And in fact, Europe is also simultaneously dealing with the biggest wave of refugees since the Second World War. In Egypt, the finance minister said millions of people could die globally because of the food crisis that's been triggered by the Ukraine war. Egypt is the world's biggest importer of wheat. In Egypt, more than half the population is eligible for subsidized bread. That's 70 million people. 

Until the war, it got its wheat from Russia and Ukraine. So, yeah, the United Nations says hundreds of millions of people around the world are at risk of hunger and destitution because of food shortages due to the war in Ukraine. Russia is not letting ships leave Ukraine's ports. 50 million tons of grain is stuck. A third are Ukrainian crops and farmland are now useless. That's 27 million tons of wheat, corn, barley all gone from the market. 57% of small business owners, as a result of all of this, say they expect conditions to get worse than they are now. Only 42% said that back in April. Small businesses have less cash on hand than big companies. It's harder for them to hang in there during an economic problem, as we witnessed in the pandemic, as well as back in 2008. 

Well, the S&P 500 is not in a bear market yet and investor complacency is the problem. Rick Rieder, the head of fixed income at BlackRock, the world's largest money manager, says the markets right now are like a category five hurricane. But the volatility index, the VIX, has not yet reached worrisome levels. The VIX was at much worse condition back in March of 2020 when the pandemic began and November of 2008 when the credit crisis began. And so we aren't yet worried. You aren't yet panicking, are you? A lot of financial advisers say the markets haven't bottomed out until people start panicking.

So hurry up and get on with it. Will you start freaking out so we can hit the bottom already? I'm saying that only somewhat facetiously.