How to save in times of inflation?
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New York (CNN Business)--
Inflation is at its highest point in 40 years and Americans are feeling it.
A liter of gasoline costs about double what it did in January 2021. House prices increased by 19.8% year-on-year in February.
And, in March, food cost 10% more than the previous year.
Fortunately, some analysts think that the burden could be eased soon and that we have reached an inflation ceiling.
This week, the Federal Reserve is meeting and likely to announce plans to raise interest rates, a tool used to combat runaway inflation.
However, investors fear that accelerating the pace of interest rate hikes could drag the economy into recession.
Ryan Detrick, chief market strategist at LPL Financial, thinks it's likely that inflation has already peaked on its own and the Fed could start cutting interest rates in the second half of the year.
The core index of personal consumption expenditures, which the Federal Reserve closely monitors to measure the price of goods and services, grew 5.2% in March, excluding food and energy prices, it was below economists' expectations and for the first time it has fallen on a monthly basis since October 2020.
UBS analysts also said this month that they expect inflation to peak in March and then fall "sharply".
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These tips will help you save in times of inflation
Detrick points to three key economic indicators for that claim: a drop in used car prices, a lack of "sticky" inflation, and a relative easing of supply chain chaos (although China's Covid-related shutdowns could put end to that).
Chip shortages caused by supply chain problems and Russia's invasion of Ukraine have made getting a new car very difficult, and as a result, prices for used cars and trucks have skyrocketed.
In February, the price of a used car was up about 45% from a year earlier, according to the Manheim Used Car Value Index.
But since then it has dropped to around 25%.
Two months of declines show that used car prices, which make up 4% of the consumer price index, may finally be returning to pre-pandemic levels.
The Federal Reserve Bank of Atlanta divides inflation into two categories: sticky and loose.
Sticky inflation is a basket of goods that tends to change more slowly and permanently in price, things like the cost of education, public transportation, and motor vehicle insurance.
Flexible inflation includes items that rise and fall in cost more quickly: gasoline, clothing, milk, and cheese.
During the stagflation of the 1970s, both sticky and flexible inflation increased.
But so far sticky inflation has been relatively flat relative to flexible inflation, a good sign that this could still be temporary.
Of course, it could take some time for sticky inflation to catch up, but Detrick says he's optimistic.
Flexible inflation is like a rubber band, he said, you can stretch it enough and it will still bounce back.
These are the 10 countries with the most inflation in the world (and 3 are from South America)
And while the lockdowns in China could hurt the global supply chain, the problems seem to be easing, at least for now.
If businesses can easily get more supplies, material prices will drop and consumers won't pay as much for goods and services, Detrick said.
Shipping rates from Shanghai to Los Angeles, New York and Rotterdam are down 28% on average from last year's high, according to data from LPL Financial.
The reliability of schedules for container ships also continues to improve, according to new data from analytics firm Sea-Intelligence.
March also marked the third consecutive month of declines in average container ship delays.
As a result, the drop in inflation could be sudden, especially for durable goods, Detrick said.
Still, he warned, it's hard to tell if we're seeing the light at the end of the tunnel or an oncoming train.
Buffett and Munger's big day
Investors flocked to Omaha this weekend for Berkshire Hathaway's annual shareholder meeting, the first since 2019.
There, they saw and heard commentary on the state of the economy and the stock market from market gurus Warren Buffett and Charlie Munger.
They also enjoyed candy provided by See's Candies and the Berkshire-owned Dairy Queen, reports my CNN business colleague Paul R. La Monica.
Among all the ice cream cones and candy, Berkshire revealed on Saturday that it bought more than $51 billion worth of stock during the first quarter of 2022, despite Buffett describing its current investment mood as "lethargic."
More than $3 billion of that was its own stock, but other big names included Chevron, Apple, Bank of America and American Express.
Together, those four shares make up about two-thirds of the fair value of Berkshire's nearly $388 billion portfolio.
Charlie Munger used his platform on Saturday to speak out against bitcoin and cryptocurrencies, which he likened to a "venereal disease" earlier this year.
Munger said Saturday that if an investment adviser wants you to put your retirement money in bitcoin, "just say no," in an apparent jab at Fidelity's recent announcement that it is planning to allow investors to buy bitcoin for their 401(k) accounts.
He also attacked what he called a "disgusting" rise in gambling attitudes toward investing, popularized by meme stocks.
Munger said the recent "crush" in the share price of online trading platform Robinhood was "some justice".
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