There are two main explanations, with diametrically diverging investment outcomes.
Under the first scenario, producer price inflation is a leading indicator for consumer price inflation. Falls in the producer price indexes will inevitably flow through to inflation indexes. Sell stocks, buy bonds.
Under the second scenario, the gap is an indicator that companies continue to be able to expand margins. It is a sign that companies are raising prices to consumers faster than their own costs are growing. Buy stocks
In this week’s podcast, Nucleus Wealth’s Chief Investment Officer Damien Klassen and Senior Financial Adviser Samuel Kerr dig into the arguments and look at the evidence.
Agenda:
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