One morning, you turn on the financial news channel to discover that the S&P 500 has surpassed the 2800 level. Stock reports continue to be favorable, and you recognize that going overweight in equities will allow you to make more money. Then the mental process comes to an abrupt halt. You start to wonder whether […]
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The Fisher Effect, coined by economist Irving Fisher, describes the relationship between inflation and both real and nominal interest rates. The real interest rate is equal to the nominal interest rate minus the predicted inflation rate, according to the Fisher Effect. As a result, unless nominal rates rise at the same rate as inflation, real
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The coronavirus has already wreaked havoc on businesses and economies around the world, and experts predict that the devastation will only get worse. What is the state of the economy in 2021? Indeed, the year is starting with little signs of progress, as the late-year spread of omicron, along with the fading tailwind of fiscal
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GDP quantifies the monetary worth of final goods and services produced in a country over a specific period of time, i.e. those that are purchased by the end user (say a quarter or a year). It is a metric that measures all of the output produced within a country’s borders. What does GDP have to
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Inflation is the gradual loss of a currency’s buying value over time. The increase in the average price level of a basket of selected goods and services in an economy over time can be used to calculate a quantitative estimate of the rate at which buying power declines. A rise in the general level of
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According to preliminary Istat figures, headline inflation in January was 4.8 percent year on year (up from 3.9 percent in December 2021), the highest level since 1996, while core inflation remained unchanged at 1.5 percent year on year. The statistical carryover for 2022 inflation is 3.4 percent following January’s announcement. Data reveals that the current
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During a recession, you might be tempted to sell all of your investments, but experts advise against doing so. When the rest of the economy is fragile, there are usually a few sectors that continue to grow and provide investors with consistent returns. Consider investing in the healthcare, utilities, and consumer goods sectors if you
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Venezuela has the highest debt-to-GDP ratio in the world as of December 2020, by a wide margin. Venezuela may have the world’s greatest oil reserves, but the state-owned oil corporation is thought to be poorly managed, and the country’s GDP has fallen in recent years. Simultaneously, Venezuela has taken out large loans, increasing its debt
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When the Fed rises interest rates, the goal is to reduce consumer demand, which will eventually lead to lower prices. Why does increasing interest rates cause inflation to fall? Higher interest rates make borrowing money more expensive, encouraging businesses and individuals to borrow less and save more. As a result, there will be less money
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Inflation isn’t going away anytime soon. In fact, prices are rising faster than they have been since the early 1980s. According to the most current Consumer Price Index (CPI) report, prices increased 7.9% in February compared to the previous year. Since January 1982, this is the largest annualized increase in CPI inflation. Even when volatile
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