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‘Common man’ CPI

Headline inflation has subsided in the U.S. but is still stubborn. In March 2024, the U.S. consumer price index saw an annual increase of 3.5%, down from its peak 9.1% increase registered in June 2022, but higher than February's figure and higher than expectations.

"This is the weakest performance for the U.S. economy since the undeclared recession in the first half of 2022, and it’s a noticeable softening from 4.9% growth in the middle of 2023," said the Wall Street Journal op-ed.

Core CPI, which excludes volatile food and energy prices, rose 3.8% from a year ago.

However, Trennert uses a different measure — one that may better portray the situation faced by the average person.

In 2022, Strategas Research Partners developed a “Common Man” CPI, an index composed of essential items people must buy, rather than what they might buy.

“We've created this Common Man CPI, which is the opposite of core, it's stuff that's really core — it's food, it's inflation, it's housing, it's clothing, insurance and utilities,” Trennert said, adding that this measure has “grown faster than wages by about 8% over the past three years.”

When the prices of necessities increase substantially faster than wages, it does not bode well for the working class.

“... inflation is the tax that hurts the working classes and middle classes the most. Wealthy people don't notice it, but the average person notices that every day," Trennert remarked.

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Rich resilience

Indeed, the wealthy can experience a markedly different fate under inflation.

In January, the non-profit Oxfam reported that the world’s billionaires have become $3.3 trillion wealthier than they were in 2020, with their wealth increasing at a rate three times faster than that of inflation.

The report painted a starkly different picture for the working class, noting that individuals are working harder and longer hours but struggle to match the pace of inflation.

“The wages of nearly 800 million workers have failed to keep up with inflation and they have lost $1.5 trillion over the last two years, equivalent to nearly a month (25 days) of lost wages for each worker,” the report states.

The total net worth of the wealthiest 1% in the U.S. hit $44.6 trillion at the end of 2023, according to Federal Reserve data, which marked a nearly 50% jump from the first quarter of 2020.

The reality is, while the working class struggle to keep pace with inflation, billionaires have been able to grow their wealth faster than the pace of inflation through a combination of assets and strategic investments.

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Jing Pan Investment Reporter

Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.

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