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inflation Archives

What is Inflation?

You may remember from Economics 101 that inflation is basically defined as “too much money chasing too few goods and services.” Here’s what that means for investors.

At its most basic, inflation means it costs more money to buy goods and services. It means that dollar bill in your pocket isn’t worth as much right now as it was ten years ago. 

For investors, inflation is widely believed to be detrimental to bonds, but there are conflicting opinions on how it influences stocks. In a nutshell, the positive impact of inflation on the top line is nullified by various associated costs, resulting in a neutral bottom line. So the equity side of the balance sheet faces almost no impact from inflation, resulting in a neutral return on equity but a higher debt-to-equity ratio.

It’s worth pointing out, however, that inflation is intimately tied to interest rates. Inflation is the number-one driver of higher interest rates, and that’s controlled to some extent by the Federal Reserve. 

Throughout its history, the Fed’s priorities have evolved to reflect changes in the economy. Prior to World War II, its role generally remained limited to maintaining financial market stability and preserving the value of the dollar. With the arrival of the war, the Fed’s policy shifted to help keep interest rates low to facilitate the government’s war borrowings. In the decades after the war, the Fed’s primary objective was to keep inflation tamped down – occasionally raising interest rates to “remove the punch bowl just as the party was getting started.” 

In short, forecasting the dollar’s trend is a notoriously difficult task due to the myriad of variables involved. For investors, the overall economy is worth keeping an eye on, however, the answer to the “what to do with your money” question is obviously to invest it.

Investing puts your money to work for you and offers the possibility of outpacing inflation and even multiplying it over time.

To learn more about stocks and investing, download our FREE report, How to Invest in Stocks and Other Investing Basics, today. You’ll learn about the four types of stocks, what it takes to be a successful investor, and you’ll discover five reasons you should skip the broker and invest on your own. 

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Cabot Stock of the Week 332

From the Cabot Stock of the Week 332 issue of Cabot Stock of the Week|by Timothy Lutts|Stock Market

Overall, the market remains very healthy. Yes, sentiment is a bit high, and yes, valuations are a bit high, but I learned long ago not to fight the trend.
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Cabot Prime Week Ending January 22, 2021

From the Cabot Prime Week Ending January 22, 2021 issue of Cabot Prime|by Cabot Wealth Network|Cabot Prime

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
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Cabot Prime Pro Week Ending January 22, 2021

From the Cabot Prime Pro Week Ending January 22, 2021 issue of Cabot Prime Pro|by Cabot Wealth Network|Cabot Prime Pro

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
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Cabot Small-Cap Confidential Weekly Update

January 21, 2021|From Cabot Small-Cap Confidential|by Tyler Laundon|Small Cap Stocks

The big news this week was, of course, the swearing in of President Biden and all the associated stories about the transition. Fun fact – portfolio holding Everbridge (EVBG) supplied its Mass Notification system to help keep Washington, D.C. area residents and visitors safe and in...
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Cabot Global Stocks Explorer 727

From the Cabot Global Stocks Explorer 727 issue of Cabot Global Stocks Explorer|by Carl Delfeld|Emerging Markets

Today, I have a new recommendation that links three high profile growth trends: SPACs, e-commerce and internet gaming, and mobile payments.
Read More

Cabot Dividend Investor Weekly Update

January 20, 2021|From Cabot Dividend Investor|by Tom Hutchinson|Dividend Stocks

The market is off to a good start this year and anticipating wonderful things for 2021.
Read More

Cabot Undervalued Stocks Advisor Weekly Update

January 20, 2021|From Cabot Undervalued Stocks Advisor|by Bruce Kaser|Value Investing

As value investors in a remarkably robust (exuberant) stock market, full valuation impels us to want to sell a stock. Such is the case with General Motors. On most conventional metrics, the stock is fairly priced. Through the courtesy of several friends, we’ve some...
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Cabot Stock of the Week 331

From the Cabot Stock of the Week 331 issue of Cabot Stock of the Week|by Timothy Lutts|Stock Market

Overall, the market remains very healthy. Yes, sentiment is a bit high, and yes, valuations are a bit high, but I learned long ago not to fight the trend.
Read More

Cabot Prime Week Ending January 15, 2021

From the Cabot Prime Week Ending January 15, 2021 issue of Cabot Prime|by Cabot Wealth Network|Cabot Prime

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

Cabot Prime Pro Week Ending January 15, 2021

From the Cabot Prime Pro Week Ending January 15, 2021 issue of Cabot Prime Pro|by Cabot Wealth Network|Cabot Prime Pro

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
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Cabot Growth Investor 1463

From the Cabot Growth Investor 1463 issue of Cabot Growth Investor|by Mike Cintolo|Growth Stocks

Taking Things on a Stock-by-Stock Basis We believe one of the main reasons our system has proved durable is that it doesn’t focus on just one or two factors, but incorporates things from different angles. For instance, when selecting stocks, we’re not only looking charts...
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Cabot Small-Cap Confidential Weekly Update

January 14, 2021|From Cabot Small-Cap Confidential|by Tyler Laundon|Small Cap Stocks

As we near the end of the second week of 2021 and approach inauguration day, the market is barreling full steam ahead, seemingly unaware of the dung piles that are consistently thrown in its path.
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Cabot Global Stocks Explorer Bi-weekly Update

January 14, 2021|From Cabot Global Stocks Explorer|by Carl Delfeld|Emerging Markets

The phrase you hear more than ever from market prognosticators these days is that they are “cautiously optimistic” about the state of the stock market. In some ways this is pretty useless advice, but in another it hits the nail on the head. market...
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Cabot Undervalued Stocks Advisor Weekly Update

January 13, 2021|From Cabot Undervalued Stocks Advisor|by Bruce Kaser|Value Investing

Most stocks on the Cabot Undervalued Stocks Advisor recommended list had strong performance this past week. Part of the strength was perhaps due to money managers’ general optimism that seems to brighten with turn of the calendar. With last year’s bonuses firmly in bag,...
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Cabot Dividend Investor 121

From the Cabot Dividend Investor 121 issue of Cabot Dividend Investor|by Tom Hutchinson|Dividend Stocks

A Goliath of the Dawning Digital Age Are you sick of hearing about the virus and the election? I know I am. But there’s good news. As hard as it may be to believe, these current obsessions will fade away, and soon. As the from...
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Cabot Micro-Cap Insider 121

From the Cabot Micro-Cap Insider 121 issue of Cabot Micro-Cap Insider|by Rich Howe|Small Cap Stocks

How I Pick Micro-Caps It’s been a while since I’ve explained my process for picking micro-cap stocks so I figured it would be worthwhile to review. It can be extremely profitable to invest in growth companies, as any Tesla or Amazon shareholder will tell you. But is...
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Cabot Stock of the Week 330

From the Cabot Stock of the Week 330 issue of Cabot Stock of the Week|by Timothy Lutts|Stock Market

The first week of the year saw buyers dominate, pushing the major indexes to higher heights on most days. Thus the major uptrend is intact, but extended, which means this is probably not the best time to buy an aggressive growth stock.
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Cabot Prime Pro Week Ending January 8, 2021

From the Cabot Prime Pro Week Ending January 8, 2021 issue of Cabot Prime Pro|by Cabot Wealth Network|Cabot Prime Pro

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

Cabot Prime Week Ending January 8, 2021

From the Cabot Prime Week Ending January 8, 2021 issue of Cabot Prime|by Cabot Wealth Network|Cabot Prime

Stock Recommendation Tracker The Stock Recommendation Tracker is a table that features all of the current recommendations in all of our portfolios. It’s a quick way for you to see what stocks are currently in our portfolios and will highlight new additions or any to...
Read More

Cabot Global Stocks Explorer 726

From the Cabot Global Stocks Explorer 726 issue of Cabot Global Stocks Explorer|by Carl Delfeld|Emerging Markets

The most important catalyst for America’s political upheaval as well as the prime generator of wealth over the last three decades has been the inexorable rise of finance and technology and the relative decline in terms of jobs, growth and profits from manufacturing industry...
Read More

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