stock market yield inflation rising

The Stock Market’s Moment Of Truth Comes Tomorrow

This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.

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The Stock Market’s Moment Of Truth Comes Tomorrow

The market continues to climb, now on a three-day winning streak. It is likely that we could continue to see prices rise over the near-term. The big news will come tomorrow when the CPI report comes out. Investors are expecting an increase of 2.0 percent vs. the same period a year ago, while CPI less food and energy is expected to rise by 1.7 percent.

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Stock Price Continue To Rebound, More To Come?

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How will stocks react? It is some ways the moment of truth for the stock markets, right? Everyone seems so convinced the markets free fall last week was driven by rates on the 10-year suddenly rising over the past week, and that hot 2.9 percent y/y change in wages. Right?


So, if inflation comes in hot tomorrow, shouldn’t the market fall? One would think so, of course, that would be if the rising yields were actually the reason for the sharp declines last week. Just look at the sharp rise in rates, all last week. They started February 1 at 2.85 percent, and have risen all the way 2.85 percent today. Oh wait, they didn’t rise at all now did they?


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But inflation, that is creeping into the system, just look at surging gold and Oil prices? On February 1, Oil stood at $66 per barrel, and it has  DROPPED all the way $58.75, a decline of 11 percent. Meanwhile, Gold the mighty hedge against inflation and safe harbor in the eye of the storm stood at $1,345 and today $1,329. So much for the that.

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But the dollar…. Forget it!

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What’s The Best Hedge Against Inflation? Stocks!

What I find so surprising in all of this, is that stocks are the best hedge against inflation! Stocks! Look a the returns of the S&P 500, Consumer Price Index and Gold since the late 1970’s.  It is not even close!

US Consumer Price Index Chart

US Consumer Price Index data by YCharts

But of course, the best outcome would be strong inflation reading on the CPI, causing yields to rise, and a rising stock market. Why? Because finally, everyone will have to concede that the market didn’t go down on increasing rates or inflation, last week. The stock market fell because it was merely overbought and because of some alleged shady business.

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Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.

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Tags: #sp500 #yields #inflation #hedge #gold #oil #stocks 

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