Displaying items by tag: inflation

When evaluating new forms of digital money, it’s essential to clarify what problems they solve and how effectively they do so. The new USDi stablecoin aims to serve as an inflation-protected form of cash by tying its value to changes in the Consumer Price Index (CPI) since December 2024. 

Unlike traditional inflation-protected securities like TIPS, which can lose value when interest rates rise, USDi offers a form of cash that maintains its purchasing power without interest rate risk. Michael Ashton likens USDi to an inflation-linked savings account, calling it a potential “end of the risk line” for holding cash.

The coin is designed to be minted and burned based on daily CPI updates, anchoring it to real-world inflation data. However, for stablecoins like USDi to achieve mainstream use, they must overcome key challenges like merchant adoption, user-friendly wallets, and seamless onboarding to compete with familiar payment systems.

Finsum: This is a leg up in the crypto world, and a sign that creators are thinking about the relationship with traditional macro pressures. 

In a high-inflation environment, variable annuities offer a unique blend of investment growth and guaranteed income, making them an attractive option for certain retirees. Unlike fixed annuities, their value rises and falls with market performance, allowing for inflation-beating potential over time. 

They also provide tax-deferred growth and the option to convert savings into a predictable income stream that can last for life. Optional riders can offer added benefits like long-term care coverage or income guarantees, though these come with additional fees. 

However, high costs, market risk, and limited liquidity make them unsuitable for all investors. 

Finsum: For those who’ve maxed out other retirement vehicles and can tolerate some risk, variable annuities may help protect purchasing power while delivering steady income.

Economic data from the first quarter indicates slowing growth alongside rising inflation, raising concerns about stagflation. February’s PCE price index, the Fed’s preferred inflation gauge, showed its highest reading in a year, while inflation-adjusted consumer spending barely increased. 

GDP is now projected to shrink by 0.5% annually, as rising imports ahead of new tariffs weigh on growth. The University of Michigan’s consumer sentiment survey reflects increasing pessimism, with inflation expectations rising and job market concerns deepening. 

Meanwhile, Fed officials acknowledge that upcoming tariffs will likely push inflation higher, constraining their ability to cut interest rates. 

Finsum: With economic uncertainty mounting, Americans are bracing for a difficult year ahead, but they need financial products that can be robust to these risks. 

Energy stocks have outperformed the broader market this year as investors pivot toward companies with strong cash flow and reliable dividends. Despite a slight dip in oil prices, the S&P 500 Energy Select ETF (XLE) has gained nearly 8%, while tech and consumer discretionary stocks have struggled. 

Energy equities appear more resilient to inflation and tariff concerns, with experts noting that U.S. energy exports are less likely to face retaliatory trade measures. Rising natural gas prices, which have surged over 30% in 2025, have further fueled gains for energy companies. 

Some major pipeline firms, like Plains All American and MPLX, have posted double-digit gains year to date. With Brent crude trading above $71 per barrel, analysts anticipate a gradual climb before prices dip later in the year.

Finsum: With rising inflation expectations, energy stocks could be the pathway to avoid the inflation tax or at least offset it in your portfolio. 

Morgan Stanley has revised its U.S. economic outlook, predicting weaker growth and higher inflation due to escalating trade policies. The bank now expects GDP growth of 1.5% in 2025 and 1.2% in 2026, lowering its prior estimates of 1.9% and 1.3%, respectively.

Inflation forecasts have also risen, with headline PCE inflation projected at 2.5% by December, up from 2.3%, while core inflation is seen hitting 2.7% instead of 2.5%. Despite fluctuating trade policies with key partners, tariffs on Chinese imports remain in place, with China vowing retaliation.

These adjustments follow President Trump’s temporary suspension of tariffs on Canada and Mexico, reversing an earlier move to impose duties over concerns about drug trafficking and migration.

Finsum: Restrictive trade and immigration policies could weigh on economic growth, reinforcing their view of "slower growth, firmer inflation."