Why investors shouldn't lose sleep over inflation

Inflation is ...

Posted: Nov 20, 2018 12:18 AM
Updated: Nov 20, 2018 12:18 AM

Inflation is bad news for investors. It means people shop less, corporate profits are pinched and stocks are less valuable. High inflation increases the likelihood that the Federal Reserve will raise interest rates more quickly.

When inflation rose faster than expected in January, stocks fell in a tailspin.

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But inflation is under control for now. And there's reason to believe it will remain relatively low throughout next year, said David Kelly, Chief Global Strategist for JPMorgan Funds.

Wages have been ticking up. But because productivity has also been rising, inflation should remain steady, he explained.

"Stronger wage growth did not boost consumer inflation in the third quarter and probably won't do in the quarters ahead," barring dramatic changes in wage growth or productivity, Kelly noted in a recent LinkedIn post.

Falling oil prices also mean that oil, "a traditional villain in boosting US inflation," is unlikely to contribute to inflation in the year ahead, Kelly said.

Even the trade war is unlikely to boost inflation, he said. The trade war has made more than $250 billion of Chinese exports more expensive for Americans. But, Kelly noted, "an escalation of a trade war with China would also have strong deflationary impacts by slowing the global economy and likely boosting the dollar."

Kelly will join CNN anchor and correspondent Paul Newton on "Markets Now" on Tuesday to further discuss inflation and offer insight into what's happening on Wall Street.

"Markets Now" streams live from the New York Stock Exchange every Wednesday at 12:45 p.m. ET. This week, the show will stream on Tuesday instead of Wednesday. Hosted by CNN's business correspondents, the 15-minute program features incisive commentary from experts.

You can watch "Markets Now" at CNN.com/MarketsNow from your desk or on your phone or tablet. If you can't catch the show live, check out highlights online and through the Markets Now newsletter, delivered to your inbox every afternoon.

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