Did inflation douse the FIRE movement?

High Inflation

I am not sure about you, but I have been feeling the impact of inflation on my daily/monthly personal expenses and our family expenses.

Trips to work have been getting more expensive even though I am traveling via public transport. The food in the food court and restaurants has risen (not to mention the rise in GST).

The $300 CDC Vouchers issued to each household on 3 January 2023 did help, but their effects are minimal.

I am glad that I have a fully paid-up HDB apartment and am not affected by the rising rents (which are probably felt by many ex-pats who are renting). We don’t have an investment property, so unless we can find a way to monetize the apartment we are staying in, the rise in property asset prices in Singapore does not really benefit us.

This year our family decided to go on a trip to Australia in June. So we have to set aside some money for that as well.

So yeah, expenses, expenses, and more expenses.

8 in 10 Singaporeans Affected by Inflation, Finds Seedly and Milieu Insight (read here)

Still, I have made every effort to build up my war chest. Nevertheless, this has been getting harder, especially in 2023.

Singapore Inflation Rate

Directionless Stock Markets

A war chest that has yet been deployed since…. let me see…since the beginning of Feb 2023. Frankly, I have not been that active in investing. The shadows of the dark clouds of high-interest rates and lacklustre markets are ever-present.

Perhaps I have lost interest, or perhaps that just isn’t any attractive ‘proposition’.

This might sound controversial, since didn’t we just recently witnessed the second-biggest bank failure in American history. The news dominated headlines as Silicon Valley Bank (SVB) was placed into receivership on 10 March 2023. This failure was then followed by the closure of Signature Bank on 12 March 2023.

Credit Suisse, the second-largest bank in Switzerland, collapsed on 19 March 2023 and was bought by rival UBS for 3 billion CHF (about $3.3 billion USD).

However, in finance, things are not always that straightforward, and for a lack of a better word, there are simply too many moving parts. These days, with the high inflation and rising (and high) interest rate hikes by the US Federal Reserve, bad news (bank failures) could mean good news (eg. hints that the Federal Reserve could be nearing the end of its interest-rate hiking cycle).

Across the Pacific, in China, where Beijing abruptly ended its draconian property tightening measures and the unpopular zero-Covid policy, and Alibaba Group Holding’s massive overhaul plan to split its US$220 billion (S$292 billion) empire into six business units promises to yield several initial public offerings (IPOs), together with the hints that Federal Reserve could be nearing the end of its interest-rate hiking cycle, led to a short rally in Chinese tech stocks.

While US bank stocks plunged (esp. the regional banks and their ETFs) due to the headline news of the banks’ failures, the plunge was nevertheless brief. In fact, it fizzled out rather quickly.

In hindsight, at one point, there were articles discussing and fanning the fear that the banks’ failures might lead to a contagion of banking system collapses at a scale similar to what we have seen in the 2007-2008 global financial crisis.

SVB collapse: Will 2008 Financial crisis repeat? Here’s what experts say (read here)

Year-to-date, the S&P500 is up 7+% (not down, despite the ‘shocking’ headline news). See below.

Chinese Tech stock fell since the start of the year and has recently rallied (probably due to the news of Alibaba’s massive overhaul). However, it is essentially flat. See below.

At home, in Singapore, the stock prices of the major bank stocks (major components of the STI) did not exhibit major volatilities. Unsurprising the STI Index is year-to-date, essentially also flat.

As an investor sitting on the sideline with a ready shopping list of stocks, hoping for a major ‘sale’ for stocks, I just do not feel the adrenaline pumping. All the build-up of ‘hype’ from the second-biggest bank failure in American history to the collapse of the second-largest bank in Switzerland, ended in a slightly up-trending market.

And so much promise in the Chinese tech sectors since the end of last year….ended so far in a range-bound market.

Or have I missed something? Perhaps. Or perhaps I just need to be more patient. After all, it is not easy saving up for a war chest this year. An uphill task with the ‘hill’ getting steeper so to speak.

“The stock market is a no-called-strike game. You don’t have to swing at everything – you can wait for your pitch.” Warren Buffett

In Gist

Did Inflation Just Kill The FIRE Movement? (read here)

As the blogger from Mr. Tako Escapes mentioned in the above post: “Saving has always been something of a difficult prospect, but it’s even more of a challenge in 2023.”

However, stock market-wise, I would not say we are in a sinking stock market. Still, I do not find compelling bargains (well at least for the stocks that I have been eyeing), and I do find the markets somewhat directionless and range-bound. It is no secret that the persistently high inflation has ended the era of a low-interest rate environment (which was a boost for stock prices for the past 15 years or so).

On another note, a point mentioned by Mr. Tako is that there seems to be a positive correlation between FI (not just FIRE) readership and bull markets. For instance, it probably goes down when there’s a bear market, but it will pick up again when there is a bull bear. Given that high inflation (and rising interest rates) has sort of cast a gloomy cloud over the markets, it has led to a drop-off in reader web-traffic to the financial independence blogs.

It is perhaps a tad too negative to state that inflation has ‘killed’ the FIRE movement, and I am sure despite the many challenges, many are still working hard towards it.

With lesser savings and a lack of compelling bargains, I reckon for now I am contend to just focus on saving up and tallying up my passive (and active) incomes.

Thank you for reading.


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About apenquotes

Born in 1976. Married with 2 kids (a boy and a girl). A typical Singaporean living in a 4 room HDB flat. Check out my Facebook Page: https://www.facebook.com/apenquotes.tte.9?ref=bookmarks
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