There’s no place to run, no place to hide. The scourge of inflation will impact everyone’s purchasing power along with their investments. And since everything in your portfolio is probably measured against fiat currency in some way, you need to be ready for the impact of rising inflation.

If you’re aware of this and ready for it, you’re miles ahead of most people. One economist is practically pounding the table to warn the unsuspecting crowds that what’s left of the dollar’s value will deteriorate at an alarming rate.

“Inflationary pressures will develop very quickly,” was how Moody’s Analytics chief economist Mark Zandi put it. He ominously added, “I don’t think there’s any shelter here.”

It’s a credible threat, as even Federal Reserve Chairman Jerome Powell recently cautioned that inflation is likely to increase. Naturally, the government’s impending $1.9 trillion stimulus package – and the printing and spending this will entail – only adds fuel to the inflationary nightmare.

How long will it be before the hammer comes down? Probably not very long at all, as Zandi sees inflation “dead ahead.” This echoes the sentiment of Jim Caron, head of global macro strategies at Morgan Stanley Investment Management, who said that the rise in inflation could rattle investors in the spring.


The implications for your investment strategy are profound. As you can see in the chart shown above, just parking your money in an S&P 500 index fund tends to provide sub-optimal returns during inflationary periods.

And don’t assume that you can just rotate from one index fund into another. “These are broad, macroeconomic forces that are going to affect all parts of the market equally… I don’t know that there’s one part of the market that is going to do meaningfully better than the other,” Zandi warns.

Zandi’s broad-market projection sounds a lot like the blue line in the chart above. Specifically, Zandi’s forecast calls for a sideways market for one to three years, with bursts of volatility along the way due to frothiness amid rising interest rates.

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    “Most importantly,” Zandi continues, “valuations are very, very high by any historical standards.” We can confirm this as true since the historically reliable Buffett Indicator is signaling that stock market valuations are pushing into nosebleed territory.

    The Buffett Indicator is simply the total value of the stock market (sometimes measured by the Wilshire 5000) divided by the gross domestic product (GDP). By the most recent count, the total U.S. stock market’s value is $47.1 trillion, while the current quarter’s annualized GDP is estimated to be $21.9 trillion.


    At the moment, the Buffett Indicator is up to 73%, which is around 2.4 standard deviations higher than the historical average. This suggests that the market is strongly overvalued – even more so than it was during the manic heights of the dot-com bubble.

    Of course, the Fed doesn’t want you to focus on any of this. Powell wants you to believe that he’s concerned about employment, not inflation. But of course, he’s just as obsessed with inflation as every previous Fed chair was, and every future Fed chair will be.

    If you’re wondering why anybody would want higher inflation, it’s because a debased dollar makes it easier for the government to pay its massive debts – or at least, the interest payments on those debts.

    For that same reason, the Fed will continue to keep interest rates low. Sure, they’ll pop up from time to time, but Powell only needs to say a few magic words and the Fed funds rate will come right back down.

    And the index fund investors had better hope the Fed will have their backs forever. Otherwise, the markets will have to rely on fundamentals – and the slow death spiral will accelerate, with tragic consequences.

    Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!

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