Wednesday morning’s inflation numbers (as indicated by the CPI) were expected to be the highest in nearly a decade, although many in the press suggested that the numbers might appear bigger because they are being compared to the weak prices in 2020 — as a result of the pandemic. Remember also that the Fed has continued to stress that a pickup in inflation would be transitory. At this moment I’m not so sure.

At the risk of being elementary, let’s review what the CPI actually is and why we should care what its reports may mean. CPI is an initialism for Consumer Price Index. The index is put together and tracked by a department of the U.S. Federal Government known as the Bureau of Labor Statistics. The sole purpose of the CPI Index is to detect and track changes in consumer prices, in other words, the ‘cost of living’. When that cost goes up, we call that inflation.

So, to measure the changes in ‘cost of living’ the BLS measures the costs of various consumer goods and services — which they toss into a ‘basket’ and tally up the costs. The things they toss into the basket are examples of goods and services that we all tend to use on a regular basis. These include things like transportation, food, rent, medical care, grooming and so on (actually over 80,000 items are in the report). Each month data is collected from the Bureau of Labor Statistics as they visit stores, offices and websites for nationwide information on prices. Then specialists at the BLS examine the data for accuracy and adjust items based on any item’s value. I find it interesting that the actual calculation is changed almost every year.

Let’s get back to looking at the latest report, which caused a chain-reaction response in financial markets. Fireworks were expected if the numbers came out hot, and fireworks we got. A gain in the range of 3.6% was anticipated. When the actual CPI number was announced, however, at +4.2% (the biggest leap in CPI since 2008!), markets responded negatively with about a 2% selloff. (It did not help one bit that to even mention 2008 – the beginning of what became known as the Global Economic Crisis. Fortunately there is NO similarity between then and now.)

Early this morning ‘The Media’ appeared to stoke our sorry memories of the inflationary experience from the 60’s and 70’s when big government spending, an oil crisis, and a SLOW-moving Fed combined to send price gains up into the double-digits. Central banks finally put a lid on that by raising rates to unthinkable levels- resulting in a break in the housing and jobs markets of that time.

However, if the latest round of price increases is mostly a result of imbalances in the economic system caused by the raging covid events of last year, (and this appears likely to me!) then it’s just the logistics that consumers have gone a year without buying the things they normally do, without traveling, and without getting out of the house to just ‘shop’ that COULD be causing this bump. It’s raw materials, electronics, even used cars that are suddenly in demand- and consumers have been saving the cash that is now chasing these materials and bidding up the prices. That of course, COULD be transitory.

We won’t know for a while, and the inflation assumption affects our buying and also our investing habits. An inflationary environment bodes well for certain assets, and NOT for others. That has a direct effect on you and me. And that may be what the public is thinking about this week.

Personally, I think that when people are confused or have no idea what’s going on, it’s easier to reach for the ‘sell’ button. If Thursday’s market is an about-face with stocks running back up, that will be what I expect as I write this on Wednesday. People got a whiff of bad news on Wednesday morning and reacted. Perhaps Thursday will be a bit of rationality returning to markets. We’ll see.

Ron’s Market Minute — Whack a Mole!

You might remember seeing a game at a kiddie amusement park called ‘whack-a-mole’. In that game little moles pop up from random holes in a board, and your objective is to whack them back down with a mallet. Then as soon as one gets whacked down, another one pops up. The result is that your attempt to solve the problem results only in a temporary or minor improvement.

This week I heard the fight against cyber-crime referred to as a game of whack-a-mole. And I can see that. It appears that one cyber-attack is stopped and another one pops up. (Like the pipeline problem on the east coast.) Another instance that I heard this week referred to today’s market environment. One asset class pops up and investors jump onboard, only to see it whacked down by the economy, and another one takes its place. In a normal sort of environment there is some serial correlation- where an object (investment class) tends to move in the same general direction over some time period.

In this rather unusual year, we’re seeing many moles pop up and then almost immediately disappear, only to be replaced by others. Eventually supply and demand intervenes and restores a sense of reason. At that point the longer term type of thinking chases away the reactionaries obsessed with the momentary. At such times it is good to recall a warning from former president (and former Supreme Allied Commander) Eisenhower, who noted ‘Don’t confuse the urgent with the important’. Distractions must be kept in check. Markets will return to a basic supply-and-demand environment in which it’s easier to spot the moles that will be in place for longer periods of time. Here’s hoping it comes sooner rather than later. Mother always said there would be times like these.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk


This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners for use with advisory clients only and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email, please contact us at 602-252-8700 or by e-mail at If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

Lincoln Financial Securities and Denk Strategic Wealth Partners and their representatives do not offer tax advice. Please see your tax professional regarding your individual needs.

*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.

Ron Denk is a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Mr. Denk is also an Advisory Representative offering services through Denk Strategic Wealth Partners, a Registered Investment Advisor. Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation.
Please see Denk Strategic Wealth Partners’ Client Relationship Summary here for succinct information about the relationships and services DSWP offers to retail investors, related fees and costs, specified conflicts of interest, standards of conduct, and disciplinary history, among other matters.

LFS’ Regulation Best Interest Disclosure Document, which describes LFS’ broker-dealer services, and other client disclosure documents can be found here <>.
Past performance is not a guarantee of future returns.