2022 Outlook: Inflation Focus - Apollon Wealth Management
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2022 Outlook: Inflation Focus
This report is intended for the exclusive use of clients or prospective clients
of Apollon. The information contained herein is intended for the recipient, is
confidential and may not be disseminated or distributed to any other person
without the prior approval of Apollon. Any dissemination or distribution is
strictly prohibited. Information has been obtained from a variety of sources
Disclosure believed to be reliable though not independently verified. Any forecasts
represent future expectations and actual returns; volatilities and correlations
will differ from forecasts. This report does not represent a specific
investment recommendation. Please consult with your advisor, attorney and
accountant, as appropriate, regarding specific advice. Past performance
does not indicate future performance and there is a possibility of a loss.
1
Inflation: Where We Stand Today
• Consumer Price Index (CPI) rose 7.5 percent year-over-year as of February 10, 2022. That is the largest annual gain in nearly 40
years. Recent headline figures were materially impacted by energy. Broad energy prices were up 27 percent, propelled by motor
fuel prices rising 46.5 percent in the last year.
• In January, the Federal Reserve once again acknowledged elevated inflation levels and signaled a higher likelihood of increasing
the Fed Funds Rate at it’s March 15/16, 2022 meeting, but only after eliminating the current Quantitative Easing (QE) program.
The has priced a high likelihood of a 0.25 percent move but has not removed the possibility of a 0.50 percent move.
CPI Reaching Levels Not Seen Since the 1980s
January 2022
7.5%
7.5%
January 2022
6.0%
5.5%
3.5%
1.5%
-0.5%
-2.5%
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jul-21
Jan-22
Headline Core
Sources: U.S. Bureau of Labor Statistics, Federal Reserve 2Inflation Coming or Going?
Transitory Persistent
Energy Prices Wage Increases
Transportation (Autos) Rents / Housing
Supply Chain Disruptions
Semiconductor Shortage
Price Chanages in Used Cars & Trucks
50
June 2021
45.34%
Monthly Used Car & Truck Year over Year (%)
40
30
20
10
0
-10
3The Fed & Fixed Income
Duration in years Yield, percent
3.4%
6.9
6.7
2.9%
6.8
6.5
2.4%
6.3
1.74%
6.1 1.9%
5.9
1.4%
5.7
5.5 0.9%
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
US Agg - Modified Duration (left axis) US Agg - YTM (right axis)
Source: FactSet, as of December 20, 2021. US Money Supply represented by US M2. US Agg represented Bloomberg US Aggregate Index. Use of Indices and Benchmark Return Indices
cannot be invested in directly. Index performance is reported gross of fees and expenses and assumes the reinvest dividends and capital gains. Past performance does not indicate future
performance and there is a possibility of a loss. See disclosure page for indices representing each asset class.
4Source: Sources: Capital Group, Bloomberg Index Services Ltd., Morningstar, as of October 31, 2021. Daily results for the index are not available prior to 1994. For those
earlier periods, returns were calculated from the closest month-end to the day of the first hike through the closest month-end day of the final hike. Starting Yield to Worst
sourced from FactSet and is taken from the start of the month in period displayed.
5Equity Returns – One Index, Two Phases
160%
141.4%
140%
Phase 1: Multiple Expansion
125.6%
Cumulative Gain
120%
112.5%
100%
Phase 2: Earnings Growth
80%
60%
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21
Note: 1/1/2020 = 100%. Price EPS (NTM) P/E (NTM)
Source: FactSet, as of December 20, 2021. Returns represented by S&P 500 Index. Use of Indices and Benchmark Return Indices cannot be invested in directly. Index performance is
reported gross of fees and expenses and assumes the reinvest dividends and capital gains. Past performance does not indicate future performance and there is a possibility of a loss. See
disclosure page for indices representing each asset class.
6Policy Maker Tightrope
1 Healthy Environment for Active Fixed Income
2 Manage Interest Rate Risks
3 Likely Greater Reliance on Earnings
4 Emerging Markets May Shine
7Disclosures and Definitions
All material and information is intended for Apollon business only. Any use or public dissemination outside firm
business is prohibited. Information is obtained from a variety of sources which are believed though not guaranteed to
be accurate. Any forecast represents future expectations and actual returns, volatilities and correlations will differ
from forecasts. Past performance does not indicate future performance. This presentation does not represent a
specific investment recommendation. Please consult with your advisor, attorney and accountant, as appropriate,
regarding specific advice.
When referencing asset class returns or statistics, the following indices are used to represent those asset classes,
unless otherwise notes. Each index is unmanaged, and investors can not actually invest directly into an index:
• The S&P 500 is a capitalization-weighted index designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing all major industries.
• Russell 1000 Growth measures the performance of those Russell 1000 companies with higher P/B ratios and
higher forecasted growth values.
• Russell 1000 Value measures the performance of those Russell 1000 companies with lower P/B ratios and lower
forecasted growth values.
8Apollon Wealth Management, LLC (Apollon) is a registered investment advisor This document is
intended for the exclusive use of clients or prospective clients of Apollon. Any dissemination or
distribution is strictly prohibited. Information provided in this document is for informational
and/or educational purposes only and is not, in any way, to be considered investment advice
nor a recommendation of any investment product or service. Advice may only be provided after
entering into an engagement agreement and providing Apollon with all requested background
and account information. Please visit our website for other important disclosures.
http://apollonwealthmanagement.com
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