What Does Rising Inflation mean for Stock Investors?

With inflation on the rise in recent months, stock market investors have used the wisdom of the street to find hedges or protections in commodities, REITs, or real estate mutual funds, as well as stocks and mutual funds. But while those asset classes hedge against energy inflation, they do not hedge against underlying inflation, according to a new expert research report from Wharton and the University of Hong Kong titled “Getting to the Core: Inflation Risks Within and Between. asset classes. ”

“The main conclusion of our research is that what is known as core inflation needs to be analyzed separately, excluding food and energy,” said Wharton finance professor Nikolai Roussanov, who co-authored the paper with Xiang Fang and Yang Liu. assistant professors of finance at the University of Hong Kong. “Much of the discussion in the popular press about different asset classes as they relate to inflation tends to overlook this distinction.”

Core inflation tracks the prices of goods and services, including housing, household items and activities, clothing, transportation, healthcare, and recreation. Core inflation indices, along with food and energy inflation, make up the consumer price index or headline inflation. The consumer price index for urban consumers increased 5.4% (before seasonal adjustments) in June 2021, representing the largest 12-month increase in 13 years, according to the latest Labor Department report. Within that, core inflation increased 4.5%, the largest increase in 12 months since November 1991, and energy inflation increased 24.5%; the food index rose 2.4%.

“[The conventional wisdom that] commodity futures, for example, are a good defense against inflation because commodity prices will go up is not necessarily true,” Roussanov said. Commodity futures hedge against energy inflation, “but energy is not always the main component of inflation,” he added. “It so happened that for the last 20 years inflation has been generally moderate and energy, the most volatile part, really jumped. Many inflationary movements have been overshadowed by high energy prices, especially oil, which is the most powerful. ”

“Many inflationary movements have been overshadowed by high energy prices, and oil in particular is the most powerful.” – Nikolai Roussanov

Key Results

“We argue that looking at inflation into core and non-core components (with a particular focus on energy) is important because it sheds new light on the nature of inflation risks,” the article authors said. “First, core and energy inflation have very different statistical and economic properties. Second, the inflation hedging properties of conventional “real assets”, such as stocks, currencies, and commodity futures, are largely limited to energy inflation, while offering little protection against energy inflation. risk of underlying inflation. Third, core inflation carries a significantly negative price of risk, while the price of risk associated with energy inflation is in most cases indistinguishable from zero ”.

In their study, the authors examined returns in seven major asset classes between 1963 and 2019: US stocks, Treasury bills / bonds, agency bonds, corporate bonds, currencies, commodity futures, and REITs. Between 1963 (for stocks and treasury) and 1983 (for energy), the data had different assumptions.

These Were His Main Findings:

The conventional wisdom that stocks, currencies, and commodity futures are real assets is incomplete: they only hedge against energy inflation. A long position in none of these seven asset classes can hedge against underlying inflation.

The cost of hedging against inflation, or the price of these inflationary risks, of aggregate and energy inflation is indistinguishable from zero. However, underlying inflation carries a significant negative price risk. In other words, insuring your portfolio against underlying inflation is potentially costly due to loss of profitability.

Among commodities, precious metals, especially gold, are the most widely accepted assets for preserving value. Gold and platinum have positive core inflation betas (volatility and therefore risk) that are statistically indistinguishable from zero, and are highly hedged against energy inflation. These precious metal futures have relatively low returns and high volatility, so their ability to hedge against underlying inflation risk is far from assured.
New paradigms

The dynamics of inflation have also changed in the wake of the pandemic. “After Covid, underlying inflation or commodity prices have risen in much of the economy, not just in energy costs,” Roussanov said. Higher commodity prices are also driving up costs in other parts of the economy, he added. “Those two components of inflation, core inflation and energy inflation, often don’t mix. But if they do so and they both stand up, they will somehow reinforce each other. ”

Aside from commodities, most other asset classes do not offer “good protection” against core inflation, he added. Markets in general are reviewing assumptions about assets that have so far been considered decent hedges against inflation: cryptocurrencies such as bitcoin, gold and other precious metals, and inflation-protected securities of Treasury bills, or TIPS, whose values are adjusted to the changes. in the consumer price index. Bitcoin prices, for example, have fallen steadily since their peak in March 2021.

“Now we can see that both stocks and bonds are moving in the same direction, which of course increases the risk to an investor’s portfolio.” – Nikolai Roussanov

The relationship between stocks and bonds will also change, according to Roussanov. “Over the past 20 years, [a mix of stocks and bonds] has proven to be a very strong portfolio, as stocks outperform in good times and bonds are more or less safe,” he said. And in bad times, the Fed lowers interest rates so bond yields fall, which is good for bond prices. So while stocks are falling, say in the Great Recession or even March 2020 with Covid, government bond prices actually spiked due to the Fed’s austerity measures, which compensated investors to some degree. point with this type of wallet. ”

“We may see a breakdown in this negative relationship between bonds and stocks,” Roussanov continued. “If we have an increase in inflation, it will be bad for stocks and bad for bonds at the same time.” That new comparison took place around February 2021, “when there were growing concerns about inflation, with bond yields rising and stock prices also starting to skyrocket,” he noted. “This is the paradigm that we may have to get used to. Now we can see that both stocks and bonds are moving in the same direction, which of course increases the risk to an investor’s portfolio. ”

Investor Options

So what are the reliable options for inflation hedging in the current scenario for investors? “Stay seated. There will be very little in that basket from what we have been able to find so far,” Roussanov said. “Some of the precious metals like gold and platinum seem to have some inflation hedging potential. But they are not very reliable. or very strong in the sense that they are quite volatile. ” He noted that while some market watchers see bitcoin or other cryptocurrencies as an option, he and his co-authors refrain from recommending them because their relative flourishing does not provide enough historical data to draw conclusions; he also noted its recent flourishing. price volatility as negative.

However, TIPS is always an option for investors, according to Roussanov, “TIPS provides a reliable [option] for those looking to protect their portfolios against inflation; TIPS are the safe harbor. They are not particularly attractive, they have negative returns precisely because inflation expectations have risen. ”

“If [the current trend] in inflation is transitory and fairly mild, a well-balanced portfolio of some inflation-protected stocks and bonds should do quite well in the short to medium term.” – Nikolai Roussanov

Demand for TIPS has exploded and they generated a record $ 36.3 billion in new investment in the first half of 2021, according to another Wall Street Journal report, citing data from Morningstar. Adjusted for inflation, TIPS rates have remained below 1% for most of the last decade and have turned negative in recent years, with the offset being inflation protection for capital.

Of course, persistently high inflation isn’t necessarily set in stone, and much depends on how the Fed reacts to recent spikes. Federal Reserve Chairman Jerome Powell said in House testimony last week that recent inflation was uncomfortably above the level the central bank is targeting, the Wall Street Journal reported. In June, Powell had noted that he expected inflationary pressures to be transitory, as many goods and services experienced a one-time price increase after the economy reopened, such as air travel and hotel rates, or new and used cars.

“We will have to wait and see if the Fed’s view is correct that this increase in inflation is really transitory, and we will get back to where we were a few years ago,” Roussanov said. “It is certainly not a foregone conclusion that we will see a sustained rise in inflation. I wouldn’t expect anything like what people are worried about: the nightmare scenario of high inflation of the 1970s. I don’t see the conditions for that. ”

Those prospects offer investors hope. “If [the current trend] in inflation is transitory and fairly mild, a balanced portfolio with a balanced mix of inflation-protected stocks and bonds should do quite well in the short to medium term,” Roussanov said. .

What is earned media and is it better than advertising?

This is also referred to as “organic” media. Earned media might include mentions in web articles, television interviews, and user-generated videos, for example. PR companies in Sri Lanka, Influencer marketing in Sri Lanka, digital marketing, and events are frequently used by brands to develop earned media strategy.

Earned media, as opposed to owned media, is promotion and coverage provided by third-party organizations or publications. Some brands will pitch news about a campaign they’re running to publications in the hopes of gaining earned media in the form of a news piece. Another approach for brands to get earned exposure is through awards.

Earned media coverage, gaining authority, and brand awareness from storied coverage in new channels can all help a developing brand. Some brands have full public relations teams dedicated to cultivating connections with the press in order to gain earned media coverage, while others have entire public relations teams dedicated to cultivating relationships with the press in order to gain earned media coverage.

If owned media sites are the destination, earned media is the mode of transportation that gets people there. What good is a website or social media platform if no one visits it or engages with it? Earned media has a role in this. Earned media is simply online word of mouth, and it takes the shape of ‘viral’ trends, mentions, shares, reposts, reviews, recommendations, and content picked up by third-party sites. A combination of excellent organic search engine rankings and content supplied by the brand is usually one of the most powerful driving forces of earned media.

The Formal Dresses Market in Australia

When you think of dressing up as a competition, Australians are strong contenders for first position. Celebrating life is in the DNA of the laidback and fun people, and wearing beautiful dresses for the formal events of their lives is a common thing done. Formal frocks like wedding guest dresses, bridesmaid dresses, mother of the bride dresses and other dressy wear are flying off the shelves with each festive, wedding and party season. However, there presents a problem; there’s a dearth of options for women in Australia looking to dress up well. Retailers are focusing their efforts on casual and work clothing, rather than on the formal wear department. In this article we explore the problems of the formal dresses market in Australia, the rising force of change and the future of this niche but highly profitable market.

Despite Australian’s tendency to spend during party season, retailers are slow to rise to the demand. One reason is that retailers are mostly sluggish in responding to market forces as there is a lack of competition in the protected industry. Australia’s fashion industry is largely closed up with most stores locally owned. International brands face heavy taxes and difficulty in setting up business with an unsupportive framework to introduce them into the country. Complacency in existing local brands are instead, supported. Australian women end up with limited choices, outdated formal wear designs, and high prices.

In a world where department stores are giving way to online competition, Australia is facing the opposite; department stores are still the go-to for all clothing types here. One big reason for this is the unfamiliarity and mistrust of the local people with online shopping. Australian women are used to being able to feel and touch the clothing they are going to buy, rather than seeing it through images online. They are worried about clothing fit and have heard many a news article on the discrepancy between image and actual clothing purchased online. The media is largely unsupportive to online formal dresses stores and have created an image of bad quality and unaccurate advertising on clothing offered online. To counteract this trend, independent media should come up with countrasting information and to increase their reliability, offer videos of the clothing try ons to show that clothing bought online can also be satisfactory.

Newcomers like Scarlette Label and Formal Dresses AU have come on the scene to address this lack of stylish formal dresses. One look at these websites and it can be safely said that their options are much cheaper and looks much better than options in retail stores. These online stores are also trying to win customers used to shopping in stores their way. Some of these fashion labels offer free returns to reduce the worry of customers in being unable to fit their purchase. Also, they usually offer free shipping, reducing the cost of online shopping. They also usually offer first time order discounts in hopes of encouraging first time purchasers to try them out and to win them over. Statistics show that slowly, more women are shopping online for formal dresses, but the growth is still admittedly small.

One group of girls that have to constantly face this issue is year 10 students preparing for prom. Outdated designs don’t work for the new millenial generation. In a recent interview with students on the street, I’ve gathered that only 1 in 10 students are happy with the offerings available in stores. On asking them what their solutions are, most had no answers but increasingly, some are choosing to tailor make their clothing. The cost is high but at least they will be able to make something they like. One girl interviewed informed that she is thinking of making her own prom dress to her school event, as do her friends.

Women in Australia looking to dress up for cocktail events also have a hard time. Colleagues of mine and I myself find a dearth in options in retail stores. I recently tried my luck online and thankfully found myself a gorgeous option that fit well and was made of great quality. Friends were influenced by me to look for their cocktail dresses online and we managed to dress up for the company cocktail function well. I asked other women at the function to rate how difficult it was for them to dress up for the event and most of them gave me an answer of seven to ten over ten.

It is an uphill task for women in Australia looking for formal wear, but there is hope on the horizon with new entrants into the market. Australian women just have to learn to be open to the options and embrace them with positivity. Hopefully Australian fashion retailers will improve their market understanding and improve their formal dresses offering, for many a woman down are ready to spend on their next formal dress.

Famous Hairstyles – Past and Present

There have always been those hairstyles that have become popular trends throughout every era in history. Most styles of today, in one way or another came from those famous looks of the past. Things change so much during the years and especially in any type of fashion. A number of fashionable trends start with the hottest celebrities at the moment since so many people look at them for the all important fashion do’s and don’ts.

This a list of 7 famous hairstyles of the past and present.

1. Bob / Finger Wave

The most popular and well-known style of the 1920′s was the Bob / Finger Wave. Such actresses as Zelda Fitzgerald and Colleen Moore introduced this style. This was also called “The Flapper”. To achieve this popular style the hair would be cropped from the chin to the ear and molded into waves.

2. Long Loose Curls

Soft curls falling or long, wavy natural looks were popular in the 1940′s. The curls from this time were quite loose, though they could be put up quite glamorously. Actresses such as, Veronica Lake and Lauren Bacall made this long, loose, and curly look most popular in this era.

3. The Bouffant / Beehive

The 1960′s Bouffant hairstyle was hugely popular. One reason being who wore this latest style. Jackie Kennedy, the first lady really defined this hairstyle. It wasn’t long and women all over the world were wearing this style. Later younger girls came up with a new version of the Bouffant, which was named the Beehive. Girls achieved this style by teasing their hair up with plenty of hairspray in a shape that mimicked a beehive.

4. Feathered Flip

We all remember the 1970′s and the Farah Fawcett hairstyle. Countless women just had to have this hairstyle. With this look, the hair would be parted and teased back, but still soft and flowing.

5. Perm

Perms had first been seen before the 1980s, but had not become well known until then. Women and men both were putting perms in their hair. This was done by a chemical process that adds curl to straight hair. One actress who wore this style beautifully in the 80′s was Julia Roberts.

6. The Rachel

Who can forget “The Rachel” style of the 1990′s? A certain character (Rachel) from the hit television series “Friends” started this hairstyle trend. This style spread like wildfire and women everywhere wanted it. This haircut is a layered, bouncy style with plenty of volume.

7. Layered Bob

There have been many haircuts that were really cute, but not many could be styled and worn in different ways. The Layered Bob is definitely a style that is versatile and easy to maintain. This cut works well on all facial shapes and hair textures, and also looks great straight as well as curly.

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