Fisher Investments MarketMinder: It’s a Materials World

Originally published by Fisher Investments MarketMinder on: 3/13/2008

As Madonna, a recent inductee to the Rock & Roll Hall of Fame, aptly sang years ago, “You know that we are living in a material world.” How sage. There’s no question ours is a Materials world: Materials insulate our houses, channel electricity to our lamps, make up the pages of our favorite books, and provide the infrastructure and the fuel for our cars. But surging Materials prices have investors fearing our addiction to material goods will only keep prices, and inflation, rising.

Should we fear Materials prices rising forever, propelling inflation into astral territory? While we should expect commodity prices to remain firm and continue to rise in the foreseeable future, higher commodity prices today aren’t symptomatic of runaway inflation and aren’t cause for panic. Commodity prices are driven by imbalances between supply and demand—like any freely traded good—and with today’s demand drivers and supply constraints, recent price increases shouldn’t shock . . . .

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