Inflation Panic Is Stoking Fear in the Markets. But There’s Good News for Savvy Investors

[Inside Wall Street with Nomi Prins]( Welcome to Inside Wall Street with Nomi Prins! It’s the only daily newsletter featuring the insights of Nomi Prins and her team of global experts, including regular contributing editors Eoin Treacy and Lau Vegys. You’ll find all our issues [here](. And if you have questions or comments, shoot us a note anytime [here]( or at feedback@rogueeconomics.com. Maria’s Note: Maria Bonaventura here, Rogue Economics’ senior managing editor. Today, we hand the reins over to one of Nomi’s regular contributing editors, Eoin Treacy. Eoin is a career analyst, writer, strategist, commentator, and lecturer. He’s known around the world for his knowledge of asset classes, sectors, and thematic investing. Today, Eoin shows us why we’re nearing peak inflation – and what it means for investors… --------------------------------------------------------------- Inflation Panic Is Stoking Fear in the Markets. But There’s Good News for Savvy Investors By Eoin Treacy, Contributing Editor, Inside Wall Street with Nomi Prins Inflation is the buzzword of the day. But what does that mean in the context of our distorted world? Official inflationary measures are certainly higher today than they have been in years. Year over year, the Consumer Price Index (CPI) is running at 7%. Why is inflation so much higher now than it was before the pandemic? And how much longer can that last? I believe we’re close to a peak in inflation. In today’s essay, I’ll give you the top reasons why. And I’ll show you how to navigate it in light of the carnage we’re seeing in the markets. Recommended Link [What does he know that you don’t?]( [image]( Jeff Brown picked Tesla in 2018 before it jumped 1,390%. He picked Nvidia before it jumped 3,545%. And he picked Bitcoin before it skyrocketed 22,750%. But why is he throwing away his iPhone? What does he know that you don’t? [Click here to Find out.]( -- What Peak Inflation Means for Cars and Semiconductors One of the areas where we’re seeing signs of peak inflation is the car industry. There is no doubt the pandemic upset the global supply chain. Car companies, for example, had to curtail production. That has contributed to a massive surge in used car prices. It also means there are millions of people with cars on old leases waiting for a new vehicle to trade into. [Featured: New Financial Technology Disaster for Wall Street]( As you likely know, we’re in the middle of a semiconductor shortage. This is affecting the ability of car companies to keep up with all the new orders. When the semiconductor shortage eases and old leases expire, there is going to be a glut of cars that will need to be sold. By the end of this year, used car prices should be coming back down. That’s deflationary. Taiwan Semiconductor, the biggest semiconductor company in the world by market share, will spend $40 billion this year to increase supply. Intel – the biggest semiconductor chip manufacturer in the world by revenue – will spend up to $28 billion. By the middle of 2022, the worst of the semiconductor shortage will be over. That will allow Recommended Link [Ticker Wall Street doesn’t want you to have]( [image]( Former hedge fund manager Teeka Tiwari just released the name of his top pick for you to play this $867 trillion wrecking ball… His recommendations in this trend are already up as much as 207%... 467%... 672%... 1,257%... And even as high as 4,256%. [Click here]( to get the name of his top ticker symbol for FREE, and details on 5 more tickers that could deliver 10X gains in the coming months as this massive financial trend picks up steam. [Click here for details.]( -- What Peak Inflation Means for the Housing Market But the car industry isn’t the only one feeling the effects of inflation. Bond yields have also surged higher. Investors believe if the Federal Reserve does not do something, inflationary pressures will become a problem. I agree with that conclusion. But I think the Fed only has to raise rates by 0.25% once or twice to get the result it wants. If I’m right, bond yields are already too high and could soon begin to come back down. Right now, the market is pricing in more than four 0.25% hikes this year. As I see it, that’s not even close to realistic. Either way, rate hikes from the Fed could affect today’s hot housing market. Higher bond yields have already pushed up mortgage rates. Consider the Freddie Mac conforming 30-year mortgage rate. It tracks the mortgage rate available from government-backed lenders. It bottomed in January 2021 at 2.65%. As I write this, it’s 3.56%. What does that mean for the housing market – and for homeowners? The average price of a house in the USA is $389,400. At 2.65%, the mortgage payment would be $1,569. At 3.56%, it is $1,761. In other words, someone buying the medium-priced home now needs $192 a month more than a year ago. And that’s before property taxes. Another way of thinking about it is you need at least another $2,300 a year, in net income, to afford the median-priced home. That’s siphoning money away from other spending, which is also deflationary. If I’m correct that the bond market is overreacting to inflation, then mortgage rates should peak soon, too. As the Federal Reserve continues to taper its monetary assistance, the supply of new money will fall further. That should reduce price inflation in properties. And we’re already seeing signs of a slowdown in home prices. Take a look at the chart below. It shows the S&P CoreLogic Case Shiller 20-City Home Price Index, year over year. [Chart] This index tracks the rate of increase in the 20 largest cities in the U.S. As you can see, it peaked in July at 20%, but it’s still at its highest level on record. If home price inflation keeps moderating, that will take some of the pressure off wage growth, too. That’s because one of the reasons people have been so eager to demand higher wages is because housing prices have been running away from their ability to pay. [Featured: 100,000 People Have Taken the Plunge Don’t Be Left Behind…]( All Signs Point to Lower Inflation Ahead In short, all signs point to lower inflation in the near future. And a look at the charts backs that up. Take a look at this long-term chart of CPI on a year-over-year basis. The one thing that stands out to me is how choppy it is. Periods of weak inflation followed periods of strong inflation. [Chart] Even during the Great Inflation of the 1970s, there were a great deal of swings in inflation. Every time inflation spiked, it bottomed at a higher level. I’m expecting something similar for this decade. I don’t think we are going back to the low official inflation readings from before the pandemic. After the impending peak in inflation fear, I expect it to hold higher average levels than before the pandemic. Recommended Link [Google’s (Now Former) CEO Secures Foreign Citizenship]( [image]( As part of a controversial “passport-for-sale” program… former Google CEO Eric Schmidt and his family have been approved to become citizens of a small island in the Mediterranean Sea. Strange, but not just strange. It’s something more. Because… The Schmidts aren’t the only ones who have done something like this. A mass “migration” appears to be underway in this country… and it doesn’t look good. Elon Musk… Barack Obama… Bill Gates… the list goes on and on. It could have devastating implications for us all—especially those of us with wealth to protect. To learn what’s going on… to learn who else is involved… to learn what it all means for you personally… [Click here now.]( -- What This Means for Your Money Right now, everyone is panicking about inflation, so we are probably close to a peak. Many of the stocks that rely most on low interest rates and abundant credit have sold off aggressively. This is a symptom of the distortion between the markets and the real economy, which our editor Nomi Prins has identified. As Nomi has shown [in these pages]( the stock market is addicted to cheap money. When it is abundant, prices rise. With even a whiff that the Fed might remove it, prices fall. With the Fed recently threatening to cut back on its money-printing, it makes sense that it spooked the markets. Now, if you’re invested in the markets, and tech stocks in particular, you’re likely worried about the selling we’ve seen so far this year. But we don’t expect it to last long. When the market wobbles, it scares policy makers. They will soon kickstart the money-printing machine – or at least, they will put on hold certain rate tightening plans. Then prices will begin to recover. In fact, to me, the current inflation panic suggests we are very close to a new buying opportunity. I’m watching the ARK Fintech Innovation ETF (ARKF). It tracks companies across the technology spectrum that are front and center of the greatest tech trends of our time. It includes communication companies like Zoom and Twitter, financial tech (fintech) companies like Robinhood, and leading biotech firms like Editas Medicine and CRISPR Therapeutics. I agree with [Nomi’s argument last week]( that many of these new fintech companies will outstrip conventional banks. The ARKF fund has more than halved in the last year. It is still falling, so I’d wait for the first good upside day before jumping in. It should do well when traders are less worried about inflation. All the best, Eoin Treacy Contributing Editor, Inside Wall Street with Nomi Prins --------------------------------------------------------------- Like what you’re reading? Send your thoughts to [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=RE: Inflation Panic Is Stoking Fear in the Markets. But There’s Good News for Savvy Investors). --------------------------------------------------------------- MAILBAG Readers share their praise for Nomi’s new daily e-letter, and one retired reader has a thought on [last week’s mailbag on silver and solar energy]( Nomi, I enjoy reading your column each week. You explain your opinion so people can connect the dots. – Jack R. Great newsletter, Nomi. I am a follower! While silver use in panels will increase over the years as more efficient panels come online, there will be silver recovery from inefficient and dead panels that should be added to the “equation” of silver consumption in the solar panel business. That is my thought for the day and now I can go back to being retired! – Lyndon B. Have you made any big purchases recently, like a home or a car, and felt the impacts of inflation? How have Nomi’s columns helped you make sense of today’s distorted markets? Write us at [feedback@rogueeconomics.com](mailto:feedback@rogueeconomics.com?subject=RE: Inflation Panic Is Stoking Fear in the Markets. But There’s Good News for Savvy Investors). IN CASE YOU MISSED IT… [Looking to help your retirement savings in 2022? Watch this 32-second Options Trading “Training Video”]( Options expert Jeff Clark is on a mission to show every American at or near retirement how easy it is to trade options. He even gives you names and tickers of the stocks. [Watch his 32-second Options Trading Video here.]( [image]( --------------------------------------------------------------- Get Instant Access Click to read these free reports and automatically sign up for daily research. 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