Why Everything Still Feels So Expensive

In recent years, it seems like everything has become more expensive. From groceries to gas, prices have been rising at an alarming rate. But why does it still feel like we're paying more than we should, even as some economic indicators suggest that inflation is slowing down? The answer lies in a combination of supply chain disruptions and geopolitical events that have maintained elevated prices.



Supply chain disruptions, exacerbated by the COVID-19 pandemic and geopolitical events, have led to shortages and increased prices in various sectors. For instance, the Avian flu has caused a significant increase in egg prices, with a 15.2% MoM increase in January 2025, the largest jump since 2015 (Source: J.P. Morgan Wealth Management). These disruptions have been further exacerbated by geopolitical events, such as trade wars and sanctions, which have restricted the flow of goods and increased costs.

Geopolitical tensions and events have also contributed to elevated prices by disrupting supply chains, increasing uncertainty, and driving up energy prices. For example, the Russia-Ukraine conflict has led to a significant increase in energy prices, with gasoline prices rising by 1.8% MoM in January 2025 (Source: J.P. Morgan Wealth Management). Geopolitical events can also impact food prices, as seen in the case of the avian flu, which has been exacerbated by geopolitical tensions and trade restrictions.



Economists and policymakers have been grappling with the question of why prices remain high despite signs of easing inflation. The answer lies in the persistent factors that have been driving up costs, such as supply chain disruptions and geopolitical events. These factors have maintained elevated prices, even as some economic indicators suggest that inflation is slowing down.

To better understand the role of supply chain disruptions and geopolitical events in maintaining elevated prices, it is essential to consider the following factors:

1. Supply chain disruptions: The pandemic has led to significant disruptions in global supply chains, causing shortages and increased prices for various goods. These disruptions have been further exacerbated by geopolitical events, such as trade wars and sanctions, which have restricted the flow of goods and increased costs.
2. Geopolitical events: Geopolitical tensions and events have contributed to elevated prices by disrupting supply chains, increasing uncertainty, and driving up energy prices. For example, the Russia-Ukraine conflict has led to a significant increase in energy prices, with gasoline prices rising by 1.8% MoM in January 2025 (Source: J.P. Morgan Wealth Management). Geopolitical events can also impact food prices, as seen in the case of the avian flu, which has been exacerbated by geopolitical tensions and trade restrictions.
3. Evolution in the near future: The near future may see a continuation of these factors, with supply chain disruptions potentially easing as economies adapt and invest in resilience. However, geopolitical tensions may persist, as evidenced by ongoing conflicts and trade disputes. The energy transition may also introduce new inflationary pressures, as investments in alternative energy sources at scale could drive up costs. Additionally, the precedent set by central banks for helicopter money and fiscal policy may increase incentives for debt monetization, further contributing to inflationary pressures.

In conclusion, supply chain disruptions and geopolitical events have played a crucial role in maintaining elevated prices. While supply chain disruptions may ease in the near future, geopolitical tensions and the energy transition could continue to drive inflationary pressures. Portfolio construction should reflect these potential evolutions to better position investors for different inflation scenarios.