To Assess Inflation, Turn Off the Pundits and Look at the Facts

We seem to be in a period where wishful thinking (“inflation is transitory,” “inflation has peaked”) and fighting over definitions (“that’s not really a recession”) are overwhelming facts that seem obvious to people on the street. At the risk of oversimplifying an admittedly complex subject, I would like to suggest an approach to assessing inflation and recession risks: Tune out the politicians, the media pundits and the academics and listen to your customers, employees and neighbors (ideally across every income level because whatever is happening in our economy is not impacting people equally). Look at consumer confidence surveys. Read the corporate earnings releases and see what major companies are experiencing. Learn how your vendors and suppliers are reacting. In effect, avoid the sound bites and confirmation bias. Instead, look at the facts that are staring you in the face.

This approach reminds me of Peter Lynch, one of the most successful fund managers of all time. In 1977, Lynch was named head of Fidelity’s Magellan Fund which had $18 million in assets. By the time he resigned as a fund manager in 1990, the fund had grown to more than $14 billion in assets. From 1977 until 1990, the Magellan fund averaged a 29.2% annual return. Lynch became famous for his success. He also became a folk hero for suggesting that investors should invest in what they know. He invested in Dunkin Donuts because he was impressed by their coffee as a customer and noticed how busy their locations were. He made other investment decisions after driving past retailer parking lots to see how full they were. He said that individual investors were potentially more capable of making money from stocks than a fund manager, because they were able to spot good opportunities in their day-to-day lives before Wall Street.?Of course, Lynch was backed by Fidelity’s huge research team and doubtless cross-checked what his on-the-street knowledge told him.

So, if you are frustrated by all the confusion and obfuscation about the economy, take a look at what you know and compare that to what the politicians, media and other experts are saying. You may find that the answers are more obvious and less biased than some of the experts’ opinions. #economy #inflation #recession #federalreserve