Personal Finance
Here’s the inflation breakdown for November 2024 — in one chart
Hispanolistic | E+ | Getty Images
Consumers saw inflation pick up slightly in November, as price increases in categories like groceries, gasoline and new cars outweighed a deceleration in others like shelter during the month.
The consumer price index, a key inflation gauge, rose 2.7% last month relative to November 2023, the Bureau of Labor Statistics reported Wednesday. The annual rate was up from 2.6% in October.
“I don’t see an acceleration” of inflation, said Mark Zandi, chief economist at Moody’s. “But I think it’s persistently too strong.”
“It’s not like there’s any smoking gun saying, ‘This is the problem,'” Zandi said. “It’s kind of broad-based, a little on the high side everywhere.”
That said, there are reasons for optimism, according to economists.
Namely, consumers can take “solace” that economic trends underpinning inflation, such as moderating wage growth in the labor market, remain positive, Zandi said.
“We still think we’re on the overall path of disinflation,” despite the appearance of an inflation “revival,” said Joe Seydl, a senior markets economist at J.P. Morgan Private Bank.
A ‘bounce back’ in food prices
Inflation has pulled back significantly from its pandemic-era peak of 9.1% in June 2022.
The U.S. Federal Reserve aims for a long-term inflation target around 2%. (The central bank uses a similar but different inflation gauge than the CPI, known as the Personal Consumption Expenditures Price Index, or PCE.)
“The bulk of this progress is behind us now and inflation may remain stubbornly sticky near current levels for a time,” Rick Rieder, head of BlackRock’s global allocation investment team, wrote in a note Wednesday.
While prices pressures have broadly eased across the U.S. economy, there have been some headwinds in recent months.
Grocery inflation jumped notably in November, from a 0.1% monthly reading in October to 0.5% in November, for example. (For context, a consistent CPI reading of about 0.2% each month would generally be in line with target inflation, economists said.)
Egg prices jumped about 8% during the month alone, and are up 38% in the past year, according to CPI data.
“We saw a bounce back in food prices,” Zandi said. “Part of it is avian flu: Egg prices continue to be very strong.”
Food prices are generally volatile, so one month of elevated grocery-inflation data shouldn’t set off alarm bells, Zandi said. However, it will be an important category to watch as groceries “probably matter most” to the majority of households relative to pricing, he said.
Cars and housing are other trouble spots
Additionally, categories like transportation, health care and shelter have been trouble spots, Seydl said.
Vehicle prices and airfare are big components of the transportation category. Their recent inflationary bouts are likely to be short-lived, though, Seydl said.
More from Personal Finance:
Economists have ‘really had it wrong’ about recession
Trump tariffs would likely have a cost for consumers
Why the U.S. job market is stagnant right now
New vehicle prices rose 0.6% from October to November, according to CPI data. Those for car insurance rose just 0.1% over that period, but are up 13% over the year.
In 2021, car prices spiked amid a shortage of semiconductors essential to manufacture them. That led to a severe vehicle shortage and high inflation. Later, prices fell as dealers rebuilt their inventories. Now, some price volatility is natural as the market settles back into equilibrium, Seydl said.
Car prices feed into motor vehicle insurance: When prices are elevated, insurers’ cost to replace vehicles after a car accident is also much higher. Insurers also typically need approval from regulators to raise consumer premiums, which takes time.
Airline prices, like those of autos, are also “finding a bottom,” Seydl said. Actual fares are roughly where they were before the Covid-19 pandemic, according to CPI data.
“We haven’t really had any airfare inflation from 2019 to today,” Seydl said. “We have just seen a lot of volatility.”
Labor costs are the primary input for health care inflation, he said.
While wage growth has broadly eased across much of the economy — generally lessening the likelihood that businesses will raise prices to compensate for labor — the health care sector still has a labor shortage, making price strength “pretty resilient,” Seydl said.
Prices for medical care services were up 0.4% from October to November, and by 4% over the year.
As the largest CPI component, housing also continues to prop up overall inflation readings. Shelter accounted for 40% of the monthly CPI increase, according to the Bureau of Labor Statistics.
However, it has declined notably: The shelter index increased 4.7 percent over the last year, the smallest 12-month increase since February 2022, BLS said.
Inflation for rent and owners’ equivalent rent (an estimate of the rental price a homeowner could command for their property) saw their smallest one-month increases since July 2021 and April 2021, respectively.
A bitcoin ATM in Miami.
Joe Raedle | Getty Images News | Getty Images
Bitcoin prices soared in 2024. But you may want to tread with caution before euphoria leads you on a hasty buying spree.
Bitcoin and other crypto should generally account for just a sliver of investor portfolios — generally no more than 5% — due to its extreme volatility, according to financial experts.
Some investors may be wise to stay away from it altogether, they said.
“You’re not going to have the same size allocation in bitcoin as you would Nasdaq or the S&P 500,” said Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management, based in Washington, D.C.
“Whenever you have a real volatile asset class, you need less of it in the portfolio to have the same impact” as traditional assets like stocks and bonds, said Johnson, a member of the CNBC Financial Advisor Council.
Why bitcoin prices increased in 2024
Bitcoin, the largest cryptocurrency, was the top-performing investment of 2024, by a long shot. Prices surged about 125%, ending the year around $94,000 after starting in the $40,000 range.
By comparison, the S&P 500, a U.S. stock index, rose 23%. The Nasdaq, a tech-heavy stock index, grew 29%.
Prices popped after Donald Trump’s U.S. presidential election win. His administration is expected to embrace deregulatory policies that would spur crypto demand.
A cartoon image of President-elect Donald Trump holding a bitcoin token in Hong Kong, China, on Dec. 5, 2024, to mark the cryptocurrency reaching over $100,000.
Justin Chin/Bloomberg via Getty Images
Last year, the Securities and Exchange Commission also — for the first time — approved exchange-traded funds that invest directly in bitcoin and ether, the second-largest cryptocurrency, making crypto easier for retail investors to buy.
But experts cautioned that lofty profits may belie an underlying danger.
“With high returns come high risk, and crypto is no exception,” Amy Arnott, a portfolio strategist for Morningstar Research Services, wrote in June.
Bitcoin has been nearly five times as volatile as U.S. stocks since September 2015, and ether has been nearly 10 times as volatile, Arnott wrote.
“A portfolio weighting of 5% or less seems prudent, and many investors may want to skip cryptocurrency altogether,” she said.
1% to 2% is ‘reasonable’ for bitcoin, BlackRock says
Bitcoin lost 64% and 74% of its value in 2022 and 2018, respectively.
Mathematically, investors need a 100% return to recover from a 50% loss.
So far, crypto returns have been high enough to offset its additional risk — but it’s not a given that pattern will continue, Arnott said.
You’re not going to have the same size allocation in bitcoin as you would Nasdaq or the S&P 500.
Ivory Johnson
CFP, founder of Delancey Wealth Management
There are a few reasons for this: Crypto has become less valuable as a portfolio diversifier as it’s gotten more mainstream, Arnott wrote. Its popularity among speculative buyers also “makes it prone to pricing bubbles that will eventually burst,” she added.
BlackRock, a money manager, thinks there’s a case for owning bitcoin in a diversified portfolio, for investors who are comfortable with the “risk of potentially rapid price plunges” and who believe it will become more widely adopted, experts at the BlackRock Investment Institute wrote in early December.
(BlackRock offers a bitcoin ETF, the iShares Bitcoin Trust, IBIT.)
More from Personal Finance:
Why to tweak your investments after lofty stock returns
How to make the most of crypto in 401(k) plans
Target-date funds don’t work for everyone
A 1% to 2% allocation to bitcoin is a “reasonable range,” BlackRock experts wrote.
Going beyond would “sharply increase” bitcoin’s share of a portfolio’s total risk, they said.
For example, a 2% bitcoin allocation accounts for roughly 5% of the risk of a traditional 60/40 portfolio, BlackRock estimated. But a 4% allocation swells that figure to 14% of total portfolio risk, it said.
More ‘speculation’ than investment?
By comparison, Vanguard, another asset manager, doesn’t currently have plans to launch a crypto ETF or offer one on its brokerage platform, officials said.
“In Vanguard’s view, crypto is more of a speculation than an investment,” Janel Jackson, Vanguard’s former global head of ETF Capital Markets and Broker & Index Relations, wrote in January 2024.
Stock investors own shares of companies that produce goods or services, and many investors get dividends; bond investors receive regular interest payments; and commodities are real assets that meet consumption needs, Jackson wrote.
“While crypto has been classified as a commodity, it’s an immature asset class that has little history, no inherent economic value, no cash flow, and can create havoc within a portfolio,” wrote Jackson, now an executive in the firm’s Financial Advisor Services unit.
Dollar-cost average and hold for the long term
Ultimately, one’s total crypto allocation is a function of an investor’s appetite for and ability to take risk, according to financial advisors.
“Younger, more aggressive investors might allocate more [crypto] to their portfolios,” said Douglas Boneparth, a CFP based in New York and member of CNBC’s Advisor Council.
Investors generally hold about 5% of their classic 80/20 or 60/40 portfolio in crypto, said Boneparth, president and founder of Bone Fide Wealth.
“I think it could be a good idea to have some exposure to bitcoin in your portfolio, but it’s not for everyone and it will remain volatile,” Boneparth said. “As far as other cryptocurrencies are concerned, it’s difficult to pinpoint which ones are poised to be a good long-term investment. That’s not to say there won’t be winners.”
Investors who want to buy into crypto should consider using a dollar-cost-averaging strategy, said Johnson, of Delancey Wealth Management.
“I buy 1% at a time until I get to my target risk,” Johnson said. “And that way I’m not putting 3%, 4%, 5% at one time and then something happens where it drops precipitously.”
It’d also be prudent for investors interested in crypto to buy and hold it for the long term, as they would with other financial assets, Johnson said.
Morningstar suggests holding cryptocurrency for at least 10 years, Arnott wrote.
Pra-chid | Istock | Getty Images
Expanded free filing options for 2025
For the 2025 season, Direct File, the IRS’ free tax filing program, will be open to eligible taxpayers in 25 states. That’s up from 12 states for the 2024 season.
This year, participating states include Alaska, Arizona, California, Connecticut, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington state, Wisconsin and Wyoming.
Meanwhile, IRS Free File, which offers free guided tax prep through software partners, opened on Jan. 10. Eligible taxpayers can electronically file returns prepared via Free File partners starting on Jan. 27.
Spike in UK borrowing costs raises specter of public spending cuts
Alafe Wakili is A Pioneer in African Media and Communications
What to know at tax time
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
The Essential Practice of Bank and Credit Card Statement Reconciliation
Are American progressives making themselves sad?
-
Personal Finance1 week agoHow to rebalance your portfolio after lofty stock returns in 2024
-
Accounting1 week agoDepreciation of Assets and Key Strategies for Accurate Valuation
-
Economics1 week agoRuss Vought: Donald Trump’s holy warrior
-
Accounting1 week agoUS car sales get year-end boost from Trump’s threat to end EV tax credits
-
Economics1 week agoBlockchain and Cryptocurrencies Transforming the Digital Economy
-
Finance1 week agoRIVN, BUD, F and more
-
Economics1 week agoThe US Army needs inferior, cheaper drones to compete
-
Leaders1 week agoStrive Masiyiwa Is Reshaping Digital Future and Telecommunication in Africa