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What I Learned Reading the Bureau of Labor Statistics

Recently we have been reading more about inflation concerns over the next few years. While the broad numbers do not reflect inflation to be a problem, we have increasing concerns that investors must be aware of the dangers it causes to the purchasing power of our dollars.

Recent announcements from the Federal Reserve indicate they are concerned about the fragility of the Coronavirus economy.  They indicate that even if inflation increases, they may resist raising interest rates fearing such a move could stall the recovery. Our conclusion is the Fed will defer normal actions to slow inflation.

The bond market has been adjusting over the past few months to higher inflation prospects.  Longer maturity US Treasuries have been declining with interest rates rising. The reaction is not because of direct Fed intervention. It is the lack of action.  Remember the Fed does control short term rates but their power to control long term rates is limited.

We would expect mortgage rates to begin to rise through the remainder of the year.  

Most important for us is to alert all of our readers to anticipate higher inflation expectations in the markets.  Inflation peaked about 40 years ago and since has declined to the very low levels we see today.

Please consider the most recent Bureau of Labor Statistics, Consumer Price Index: 2020 in Review.

Our outlook for interest rates is they will rise over the course of the year along with inflation concerns in general.  We could be seeing the end to a great bull market in bond markets that began about 40 years ago.


Thomas J. Curran Chief Executive Officer, Founder

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The material contained in this article is for educational and informational purposes only.  The information herein is considered to be obtained from reference sources deemed reliable, but no representation or warranty is made as to its accuracy or completeness.  This article is not, and should not be regarded as “investment advice” or construed as a “recommendation” or an offer to buy or sell a security.  The information contained in this article may not apply to your personal circumstances.  Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation.  Information on taxes is based on the tax laws existing at the time of publication.  Tax laws are subject to continual change.  In addition, tax laws vary by state.  This article is not, and should not be regarded as tax or legal advice.  We cannot ensure tax consequences of any transaction.  If you would like a detailed analysis of your tax situation, with specific tax recommendations, you can discuss the possibility of pursuing a formal relationship with Hippo Tax Services, LLC.