Amy, RE: What are your thoughts re: stock market behavior if this heats up more?
Two schools of thought here: first, let's say that this increased inflation does not derail the economy. You'll see money flow to a lot of commodity-based industries. Paper would seem particularly attractive in this case. Energy, steel, and the non-ferrous metal such as aluminum would also do well. Tech stocks that are thought of as more cyclical would do well, and INTC would fall in this category. Tech stocks with little or no current earnings would suffer, on the other hand, as higher rates would render future cash flows are almost worthless.
If the higher prices hurt the economy, however, then a lot of those same commodity-based industries that looked good in the paragraph above would suffer, at least initially. I'd be hard pressed to think of an industry that would unquestionably do well, although I'm betting that the energy industry has a decent shot. The stock market overall would probably suffer significantly. The good news is that derailing this economy would probably take a significant price shock, much larger than we're currently seeing. |
