Arrow Insights is a research firm with a focus on macro-economic factors that support both fundamental and technical analysis. We believe that theoretical research is most useful when it can actually be applied to tactical trading and asset allocation strategies.
Historically, the primary drivers for sustained domestic inflation have been a weaker U.S. dollar (USD) and accelerating wages. A weak USD has been associated with insufficient demand for U.S. Treasury securities (Figure 1) at a time when the U.S. is simultaneously recording large federal fiscal deficits and exceedingly high trade deficits. Higher inflation is supported by President Biden’s support for labor unions, a $15 minimum wage for government contracted employees, and the public desire to close the income gap between the average wage earner and the top 10% of our nation’s household income earners (Figure 2).
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