Why is everything getting more expensive?

I got my car insurance renewal. Up 22%. My grocery bill is flat but everything else — insurance, services, dining out — is relentlessly inflating. What's going on?

Welcome to the services inflation story. Goods disinflation did the heavy lifting in 2024-2025. But services inflation is sticky at 4%+ and the Fed can't fix it with rate hikes alone.

Insurance is the one that's really breaking people. Auto insurance up 20%+, homeowners up 15%+, health premiums up 8%. This is a massive hit to disposable income that doesn't show up in the headline CPI the way people feel it.

It's a labor cost story. Services are labor-intensive. Until wage growth decelerates to 3% or below, service prices keep climbing. And nobody wants wages to fall. We're in a trap.

The political dimension is real too. Inflation is the number one issue in polls. It doesn't matter that headline CPI is 2.8% when people's lived experience is 6-7% on the things they actually pay for.

The shelter component is finally decelerating, which should help headline numbers. But the gap between headline CPI and perceived inflation has never been wider.

My take: we're in a structurally higher inflation regime. 3% is the new 2%. The Fed will quietly accept this rather than crush the economy to hit their target.

I think you're right. The implication for investors is that cash and bonds need to deliver higher nominal returns just to break even in real terms. Equities and real assets benefit. Savers get punished. Again.