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The average price of a gallon of gas climbed to $3.83 recently, the highest in 10 months. I swung by the gas station on Tuesday and paid $50 to fill up my tank. That hasn’t happened to me in a while, and it’s one example of how inflation is moving in the wrong direction, explains Callie Cox, US investment analyst at eToro.

The past few months of soft-landing talk felt good for our confidence and our portfolios. Now, with higher gas bills and soaring interest rates, it seems too good. Signs of faster inflation — a natural byproduct of good times — are popping up again.

Recent CPI data showed prices grew 3.2% year-over-year in July, a faster pace than the 3% increase in June. It was the first time that inflation picked up in nearly 13 months.

Much of the sudden increase in inflation was from higher gas prices — that annoying trend you’ve probably noticed already at the pump. This may not be a one-month blip, either. Americans’ inflation expectations have started rising again, and the Cleveland Fed forecasts that year-over-year CPI probably increased this month, as well.

Sure, we may have avoided the dreaded recession. But in some ways, it feels like we’re back to square one — spiraling inflation that the Fed needs to hammer down through higher rates. If you’re worried about another inflation crisis, your feelings are valid. But I want to make one thing crystal clear: We are probably not in the same situation as 2022. Far from it, actually.

So, what does this mean for me?

Don’t panic. This may feel like deja vu, but it’s a different situation than we were in just a year ago. Remember that bull markets usually end with recessions or market crises — both of which don’t look likely at the moment.

Consider the good news. The tide in market leadership has turned, with cyclical — or economically sensitive stocks — driving the rally. Good news about the economy could be seen as bad news, at least for now. But it’s good news if you’re worried about a recession.

Think about the opportunity. Energy prices are driving inflation higher. Sure, higher gas prices are a pain, but they could be a boon for energy stocks — one of the cheapest sectors in the market on a price-earnings basis. Think about how to protect your portfolio if higher inflation causes a panic in stock and crypto prices, but remember there are usually two sides to every trade. 

About the Author

Callie Cox is an investment analyst at eToro U.S., based in Charlotte, N.C. In her role, Callie teaches customers about the power of capital markets in their wallets and in their lives. She's passionate about helping investors of all skill levels learn how to think about investing, and utilizes engaging content about stocks, crypto, and investments to educate eToro customers and prospects alike.

Callie has worked in financial research for her entire career. Prior to joining eToro, Callie worked at Ally Invest, educating customers about investing through a variety of reports, timely market alerts, and strategic initiatives like videos, social projects, and live events.

Additionally, Callie has worked with LPL Financial, TABB Group, and Bloomberg. Her work has been featured on CNBC, Bloomberg, the Financial Times, Yahoo Finance, and Barron's, among other publications. She frequently shares market analysis on Twitter at @callieabost.

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