A combination of a dragging economy and inflation is Dragflation. But there are benefits.
Our economy is dragging. With about 40,000 layoffs1 for 2022, the US recession is here. With these employee layoffs, more companies will announce more automation with robots and artificial intelligence (AI). We see this currently with Amazon Q2 earnings as they mention test uses of Prime Air drone2 drop offs in Lockeford, California and College Station, Texas on thousands of everyday items. Amazon also announced testing of robot technology3 in their warehouses. The robot names are Proteus, Cardinal, Amazon Robotics Identification (AI), and Containerized Storage Systems. Amazon is an industry leader with others to follow.
With inflation coming along to help drag the economy, consumer prices have seen record highs. Because current CPI is not a real reflection of the cost to maintain a constant standard of living, we use Shadow Stats CPI4.
With the sky falling, what is one to do? These turbulent markets are a godsend for long term retirement or investing accounts. Dollar cost averaging which is buying a specific dollar amount over a long period of time becomes very important. This is helpful because in bear markets you are buying more shares per given dollar amount and in bull markets you are buying less shares per given dollar amount. By rebalancing the portfolio to minimize the risk, the compounding factor over time is astonishing. As Albert Einstein once said, “Compound interest is the eighth wonder of the world. “He who understands it, earns it. He who doesn’t, pays it.”
Although great recessions can seem like a drag with layoff’s and inflation, there are opportunities for long term patient investors. These bumpy markets allow for an opportunity in Dollar Cost Averaging in your portfolio.
[1] https://infogram.com/crunchbase-layoffs-tracker-1h8n6m3ogl3xz4x
[2,3] https://ir.aboutamazon.com/news-release/news-release-details/2022/Amazon.com-Announces-Second-Quarter-Results-fe1df2b70/
[4] http://www.shadowstats.com/alternate_data/inflation-charts
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