What do you think the CPI will be in one year?
Tired of the ideological aspect of the inflation debate, I Ask the Twitter crowd Their opinions:
“What will be the consumer price index for the 12 months ending in October 2022?“
The reference point is that the current indicator of CPI for the 12 months ending in October 2021 is +6.2%. 1
I am curious whether these answers will reflect the “wisdom of the crowd”, or more of the study of crowd psychology, perhaps showing some recent effects, Dunning-Kruger, tribalism, and the ever-present “talk about yourself” Book/portfolio bias”.
Let’s consider each poll option and see if there is something we can discern.
1. >6.0% To choose this option, you must trust the most recent “Highest in 30 years” In the next 12 months, inflation data will continue to hit record highs. My opinion is that this is unlikely; more than 85% of the 2,632 respondents felt similar. Despite this, 14.6% of people still chose this result, which is not insignificant. This assumption basically does not improve.
Beneficiary of asset class: Stocks, gold.
2. 4.0 – 5.99% The second most popular choice, a quarter (25.5%) of the respondents said. These people are “Inflation will remain at a very high level and deviate from recent highs“Ying. I assume that the recency effect will affect this choice (see How we experience time For opposing recent arguments). The moderate increase in the supply of goods and the improvement of the supply chain have brought the economy to this level.
Beneficiary of asset class: Stocks, gold, real estate (prices).
3. 2.0 – 3.99% The most popular choice: Nearly half (48.1%) of poll participants chose moderately elevated inflation, but much lower than current levels—one to two-thirds lower. To achieve this, the main need to solve the supply chain obstacles, the supply of goods is improved, and the supply of cars and houses/rents for sale is also the same.
Beneficiary of asset class: Stocks, real estate (volume is greater than price)
4. <2.0% A very low inflation rate is the least popular option, at only 11.9%.But this outlier can happen, partly because of the basic interest rate2 Effect: At this time next year, the 6-month monthly figures for 2021 (March to October) will fall, and instead will be replaced by lower figures for 2022. If inflation eases slightly, this will make the inflation rate in the past 12 months relatively low.
Beneficiary of asset class: Real estate (volume), bonds
I want to know whether an option that specifically describes negative inflation (deflation) will move more people to choose this option.
The two extreme answers below 2% and above 6% are important because each answer embodies the potential to surprise most people.
For inflation, we can see any of a variety of results, as well as various changes caused by many different inputs: supply chains, semiconductors, and even children’s vaccination rates. Each permutation will have a very different impact on various asset classes. If there are some unusual changes, the beneficiaries of each asset class may be very different.
I always want to be aware of my own prejudices: my inflation assumption is just that I am talking about my own book, my own portfolio?
1. Twitter only allows four options, otherwise, I can be more granular, replace the fourth option with 0 – 1.99%, and add a fifth option below zero (negative number).
2. Danny Blanchflower, a professor at Dartmouth University, explained: “Monthly changes in CPI inflation are actually highly predictable.” It is just the sum of twelve consecutive monthly changes. Each month’s CPI will report the changes this month.
example. The CPI for December 2020 is just the sum of the 12-month changes from January to December 2020. In the next month, January 2021, the 11 changes used in the calculation are known, from February to December. We got a new number for January 2021, which replaced January 2020.
Therefore, as these one-time large numbers disappear next year and are replaced by smaller numbers, inflation will fall. It is hard to imagine that these jumps will repeat next year, and this is precisely this kind of inflation that is not temporary. In the next few months, we will see that big numbers will disappear and may be replaced by smaller numbers, so inflation will fall.