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2 Big Signs Indicating Stagflation Is Imminent
www.investing.com/analysis/2-big-signs-indicating-stagflation-is-imminent-200636524
2 Big Signs Indicating Stagflation Is Imminent
By Michele Schneider | Mar 23, 2023 02:59PM ET The Fed raised rates by 25 bps. The decision was unanimous. The terminal rate projection is unchanged at 5.1%
FOMC statement modifies guidance:
“The committee anticipates that some additional policy firming may be appropriate.”
My first tweet this morning before the market opened:
“I feel pretty certain Powell goes 25. Announces they're willing to keep raising at that rate as jobs are strong, the economy ok and banks aren't in a credit crisis. However, as data dependent, they could change course accordingly. $SPY remains in a trading range. Until the next fracture appears”
“And then there’s $sugar looking like it’s about to continue the rally higher. Food prices will remain elevated. And the Fed remains stuck between the damage done but the root of inflation far from fixed.”
My tweeted response after the FOMC?
“5% yields create more stress to the labor market. Does nothing for riding food prices and global inflation. Silver is outperforming gold. Sounds like Stagflation”
Here are two signs that indicate stagflation could be taking hold:
1. Silver is Beginning to Outperform gold
The daily chart of silver shows the price rising further away from the 50-daily moving average in blue.
The Leadership indicator shows that silver is beginning to outperform gold. That in and of itself is highly inflationary.
The Initial response in the indices was to buy as investors only hear “pivot.”
Powell: Intermeeting data on jobs and inflation came in stronger than expected. We considered pause, but the hike was supported by strong consensus.
Do you hear pivot? I hear considered quite different.
This is why it is essential to watch how silver performs relative to gold and how bonds perform relative to the S&P 500.
2. Long Bonds Are Outperforming the S&P 500
The daily from March 12th covers this potential in detail.
Long bonds (NASDAQ:TLT) outperforming S&P 500 is typically recessionary.
So, if you add up rising gold, silver, cocoa, sugar, copper, steel maybe oil prices, along with long bonds showing yields might have topped and then add that the bonds are doing better than the market (SPY)---that equals stagflation.
But the real issue is we have not seen the full impact of the Fed and CBs losing control. And the dollar is weak.
A perfect storm?
ETF Summary
- S&P 500 (SPY) 400 pierced for a minute, now back to resistance 390 pivotal
- Russell 2000 (IWM) 170-180 range now
- Dow (DIA) Could not hold the move over 324 the 200-DMA
- Nasdaq (QQQ) 328 is the 23-month MA resistances e and is now a bit overbought on the indicators-
- Regional banks (KRE) 44 support 50 resistance
- Semiconductors (SMH) will watch for a key reversal to the mean w/ 250 support
- .Transportation (IYT) Holding the 200-WMA 219 but has to clear the 200-DMA at 224
- Biotechnology (IBB) 127.50 resistance
- Retail (XRT) 60 ample support and 64 considerable resistance
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2 Big Signs Indicating Stagflation Is Imminent
Comments (5)
Brad Albright
Mar 23, 2023 6:23PM ET
Did I miss it? Not once in this article did the author make the case for the stagnation part of stagflation. Does she understand the term? GDP? Retail sales? Home sales? Corporate profits? What economic indicator does the author expect to start stagnating?
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Jouni
Mar 23, 2023 5:08PM ET
One of rare news content this week that are full of common sense instead of wall street hype 'stonks only go up' agenda. Well done 👍
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First Last
Mar 23, 2023 6:34AM ET
Need a new term. Wrench in the gears with 'Stagflation' is the record low unemployment. Corporate monopolies have beat the supply chain excuse to death, oil prices crashed, yet the monoplies keep raising prices. The $trillions of fiat manufactured during covid are awash across the markets manipulating prices via pure speculation. Markets just laugh off Interest Rate hikes, and place bets for when the pivot is coming. The sad truth this time around will be that the markets have to be broken, the wealth effect I believe continues to empower corporate monoplies to keep raising prices, and as long as consumers keep buying they will spiral even higher. Wages are flat, but Credit Card debt is through the roof (at record levels) even with higher rates!
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jason xx
Mar 23, 2023 5:47AM ET
The Feds projections clearly show they don't expect inflation to return to 2% until 2025 so i don't know why everyone keeps expecting these huge monthly decreases? Relax the rate hikes haven't even taken effect yet
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Joe Bourg
Mar 23, 2023 5:47AM ET
I think SVB would beg to differ on the rate hike impacts!
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trevor hron
Mar 23, 2023 5:47AM ET
Joe Bourg
Mar 23, 2023 5:47AM ET
trevor hron Sure in hinsight it was poor management. But if SVB were to hold til maturity they would have been hole. My point was the rate hikes have had an impact and is continuing to have an impact with credit tightening.
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