Deflation causing volatility
Last week’s markets saw more volatility than we have seen in the past three years. The biggest factor causing this has been deflation in Europe which we have consistently been talking about in our past videos. The main driver of this deflation is the fact that Europe is experiencing its lowest level of inflation in years.
Watch Friday’s Special Edition on the current market volatility here.
Potential deflation leads to job loss
We will be watching the economic data that is coming out this week on new home sales and existing home sales because of the rippling effect it will have on consumer retail spending. We are also watching the inflation gauge of the Consumer Price Index. Normal inflation is usually around 3% but the United States has been much lower than that for a while. If inflation continues to decline, we will enter a deflationary period. In a deflationary economy, people stop buying goods and services which leads to people losing their jobs.
Is more volatility on its way?
We saw the problems growing in Europe a couple of years ago. While Germany, in the past, had been doing very well over the other European countries, their exports are now flat. There is an upcoming European Union Summit this week that we are watching closely that has two sides. On one side, Germany’s Chancellor, Angela Merkel, doesn’t want to spend a lot of stimulus money. On the other side, France and Italy want stimulus spending. These two countries seem to have more political and financial problems because they don’t want to solve their deeper problems. This could cause more volatility in the European economy which will have an impact on the United States.
Is there something that you would like us to cover in our videos that we haven’t talked about yet? Send us your comment or call us at (205) 989-3498.
Franklin Bradford, CMT
Senior Vice President
Ashley Page, JD, MBA
Senior Vice President
fi-Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. fi-Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.