We've looked at ways in which the behavior of investors can help signal future economic expansion, or contraction, of the United States. Investors are a large group, a majority of Americans by some estimates, which means tapping into that group means tapping into a wide network of knowledge. This idea is called “The Wisdom of Crowds,” which we discussed in an earlier piece.
Mr. Market is an idea popularized by Warren Buffett, which he learned about from his mentor, Benjamin Graham.
Our chief economist, Jerry Bowyer, was recently on a panel discussion talking about the economic outlook for the United States. One of the first questions was about inflation. Jerry said that he thought inflation risks were rising, and the moderator countered by talking about how low treasury bond rates are. But do low bond rates imply that the market thinks there will be low inflation?
We've been looking at the nature of the COVID recession and the bounce back recovery, and we suggested that there were inflationary forces at play. When demand rises faster than supply and inventory has trouble keeping pace with consumer demand, that is inherently inflationary. Customers "bid" against one another for an artificially limited number of items.