(September 2020)

While the pandemic has hit the economy and markets hard, the real long-term effect that the recession could have on the economy likely hasn’t even started yet. What is that effect you might ask? Deflation. When the pandemic first hit there were worries about inflation because of price spikes in certain consumer goods. However, over time those have proven to be transitory, and instead, what is taking hold is the realization that average costs are falling in many parts of the economy, such as rent, medical care, and college tuition. For example, if you strip out housing and used car prices, the latter of which has surged during the pandemic, consumer prices as a whole fell in September.

(New York)

FINSUM + Magnifi: A long-term period of weak growth and deflation is a big fear for investors (who are envisioning a 1990s Japan-style economy). This will take months or years to play out, but might be the market theme for 2021.

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