ABC Nightlife – rising inflation
In this episode of ABC Nightlife Roger joined Philip Clark to discuss how U.S. stocks hit a one-month low on Tuesday as speculation that rising inflation pressure could prompt interest rate hikes. Technology stocks were among the biggest losers, mirroring a sell-off in China, where talk of tighter regulation sent technology shares sliding. With current and intermittent weakness in the share prices of high quality companies, is this a buying opportunity? Listen here.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Ricky Leong
:
Interesting analysis as always. I agree with your contention that we won’t see sustained inflation without sustained wage growth.
However, in many sectors wage growth is already here. For example, closed borders have created a shortage of accountants, IT and engineering professionals. There’s a bidding frenzy right for accountants with 10-12% salary increases. Engineers who threaten to quit will get an immediate pay bump. Within IT, quality candidates can name their price and be snapped up within days.
This is in addition to the well publicised labour shortages in construction, hospitality and agriculture.
One could argue that the tourism sector will remain depressed for years. In addition, many sectors are covered by long-term EBAs which lock-in in small annual pay rises.
However I really think it wouldn’t take much to push us into a 70s style wage and price inflationary spiral.
Roger Montgomery
:
Hey Ricky, Yep, you’re right. There are indeed pockets of wage growth. We do need to keep an eye on it. And if even temporary inflation emerges and it causes wage demands to rise, we could enter a period of sustained wages/inflation spiral. that wouldn’t be good because then the RBA would be forced to initiate a recession through higher rates.