Last month we wrote in our Insights report “The Coming Inflation Waves” that we should not expect inflation to come at us all at once. Instead, we should expect it to come in waves.
Well, it looks like the first wave is starting to subside.
Lumber prices were one of the most common data points when the topic of inflation was discussed. Rightfully so…it went up nearly four-fold from 2020 into early 2021.
The chart below shows just how dramatic the price movements have been.
This is exactly what we are talking about when we discuss the “waves” of inflation that we will likely see. Two steps forward and one step back will likely be the continuing pattern of price movements for inflationary assets like lumber over the coming years.
However, all inflationary assets will not move exactly in tandem. There will be ebbs and flows all around global markets.
But it is easy to see just how fast inflation can both make its presence known and recede and fall in price.
These types of price movements are the perfect conditions for investment mistakes. Make sure you stick to a disciplined process that adjusts to the changing landscape. Do not stubbornly buy and hold, but do not subject yourself to the emotional roller coaster of big price movements either.
This type of volatility lends itself to opportunities if handled correctly. But it also is full of risks for those not prepared.