Navigating Sticky Inflation & The AI Bubble: My Retirement Strategy
The highly anticipated CPI statistics are finally out. We saw a 3.4% year-over-year increase, which fell right in line with expectations, but the 0.4% month-over-month rise came in slightly hotter than anticipated. It seems the disinflationary environment Fed Governor Waller mentioned might be pausing. Digging into the details, the lingering effects of global conflicts have pushed up oil prices, directly impacting airfares, vehicle maintenance, and electricity costs.
Interestingly enough, the market shrugged it off. Both the S&P 500 and Nasdaq pushed higher. However, looking at the semiconductor sector, the DRAM ETF took a dip while the non-memory SMH ETF climbed. Ultimately, it was the Magnificent 7 leading the charge rather than the broader chip sector.
This got me thinking about the impending AGI era and the future of our jobs. With AI increasingly handling programming and legal document drafting, traditional professional workloads are shrinking.
The emerging power roles will belong to those who plan and design the scenarios utilizing these AI tools. But here is the catch: if these AI companies fail to demonstrate actual economic productivity gains, their stock bubbles will burst.
When big tech companies issue bonds, driving up interest rates, the 30-year US Treasury yield will climb higher than corporate bonds. Capital will inevitably rotate out of US AI stocks and into long-term bonds, dragging down the tech sector.
When AI stocks drop, dividend growth stocks like SCHD aren't immune either. But for those of us looking at a 30 to 50-year horizon, these dips present the perfect opportunity to accumulate core holdings like SCHD, VOO, and QQQ. In my personal pension account, I plan to allocate about 5% to dividend growth ETFs like TIGER US Dividend Dow Jones.
As I get older, my primary goal isn't chasing maximum returns—it's living off monthly distributions and being able to sleep soundly at night without worrying about market crashes. Take your time, read through the resources below, and start building a portfolio that lets you rest easy.
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