Five million Aussies on pensions and other government support payments will see the biggest rise in nearly a decade but will this be enough? Robert Giles, CEO of legendary food company SPC, is saying his fruit and vegetable products (along with many staple products in supermarkets) are heading for a 10-20% increase in price!

Fortunately from March 20, those hardest hit by inflation (i.e. Aussies on welfare) will see a 2.1% rise in welfare payments, which is the biggest jump in close to a decade. But this happens with inflation set to spike very high (over 4% and maybe 5%), which is a lot more than it was in 2013.

Inflation

This chart shows inflation was under 3%. But with the Ukraine war and the price of oil at about $US109 a barrel (which could to over $US120 a barrel, which we saw last week with the war worries), these pension payment rises could be of little help.

Interestingly back in 2013, the price of oil, and therefore petrol, was high.

Crude oil

Clearly, the best way out for all of us concerned about inflation, and what it, in turn, might do to push up interest rates, is to see a quick end to the Ukraine war. Investors should also be praying for the same because the stock market will rebound ‘big time’ if a truce and agreement between the warring parties results ASAP.

Here’s an extract from a note I’m sending to my financial planning clients in our upcoming quarterly newsletter. Like a lot of investors, they would be worried about what might happen to stocks because of Putin’s play for Ukraine.

Understandably, many of you might be worried about the fallout of the Russia-Ukraine war, but a lot of your worry comes out of the news headlines that specialise in scaring the pants off viewers and listeners. For example, one recent Saturday morning while I was writing a piece titled “Markets give peace a chance”, TV news had big headlines about “Russia widening their assault on Ukraine!”

When it comes to what’s possibly happening, I like the hip-pocket filtering process called a stock market. Why? Well, as Paul Keating once said in repeating what his mentor, former NSW Premier Jack Lang advised: “Always back the horse called self-interest, it's always trying! “

Achieving peace is in the vested interest of Putin, the people of Ukraine, the global economy, the stock market and anyone in the world who doesn’t want to see a war-caused recession. I believe a diplomatic solution will eventually show up to give Putin a win and Ukraine a ‘better than being taken over’ option, which will save people's lives and livelihoods. These are worrying times short term, but, long term, the investments we’ve arranged for you will do well.

In one of my recent speeches, I showed the audience what happened to stocks over World War II and said: “If you’re a patient long-term investor, the following revelation shows that even big one-year losses from scary wars do wash out over time: From the start of WWII in 1939 until it ended in late 1945, the Dow was up a total of 50%, more than 7% per year!”

When things get scary, some of our advice clients want us to go defensive, but that can mean you lose twice — once when the market falls and twice when it rebounds. If you’re a regular reader of my columns you’d know that I believe in long-term investing. Short-term trading is for gamblers.

Happily, Bank of America said on Friday that stock declines related to the war could have bottomed.

“The S&P 500′s -12% decline from its peak suggests much of the froth has been taken out,” said Savita Subramanian, equity and quant strategist at Bank of America Securities. “Stocks are largely pricing in the geopolitical shock, where the S&P 500 fell 9% from peak-to-trough since Russia-Ukraine headlines in early Feb, similar to a typical 7-8% fall in prior macro/geopolitical events.” (CNBC)

Let’s hope these people know what they’re talking about.