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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?
Yields
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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Inflation
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.
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 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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Tags: #sp500 #yields #inflation #hedge #gold #oil #stocksÂ
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.