By This Key Measure, the Fed's Plan Is Working

In 2019, the Wall Street Journal noted that "hating the Fed is as American as apple pie." That's undoubtedly still true today... [Chaikin PowerFeed]( By This Key Measure, the Fed's Plan Is Working By Marc Gerstein, director of research, Chaikin Analytics In 2019, the Wall Street Journal noted that "hating the Fed is as American as apple pie." That's undoubtedly still true today... Inflation spiraled out of control in the wake of the COVID-19 pandemic and recovery. It's now consistently in the 8% to 9% range. It hasn't been that high since the early 1980s. Many U.S. investors today have never seen anything like it. Heck, a lot of economists and Wall Street professionals weren't even born the last time inflation was this high. Meanwhile, the stock market is reeling. The S&P 500 Index remains deep into an official bear market. It's down roughly 25% from its January peak. Most of us have experienced steep market downturns before. But over the years, we got used to the Federal Reserve rescuing stocks by cutting interest rates. Today, the Fed is doing the opposite. The federal funds rate is now above 3% and climbing. And it feels like the economy is sitting at the edge of a cliff... We're already in recession, technically speaking. Now, prognosticators are starting to talk about a meaningful downturn – one that really hurts and lasts for an extended period. So I realize that what I'm about to say is hard to accept. But right now... The Fed is getting it right. I'm serious. And we have data to support that claim... Today, we'll look at one key measure that tells us better days are closer than you might think. And as you'll see, it shows us the Fed could soon get the economy rolling again... Recommended Links: [** Major Patent Alert: October 23, 2022 **]( A major announcement on that day could force a wave of money into THREE companies. Their exclusive patents could soon be worth up to $150 billion... and lead to multiple gains up to 400%+ no matter what's happening in the market. [Click here for breaking story](. [Get Your Money Out of U.S. Banks Immediately]( A historic financial reset in 2023 could soon result in a run on the banks. Get out of cash and into a new vehicle 50 years in the making. [Full details here](. We're currently facing what economists like to call "demand-pull inflation." That simply means too many dollars are chasing too few goods. Importantly, foolish policy didn't cause this phenomenon. It was the outcome of our response to the COVID-19 pandemic. The economy didn't merely slow. Major portions of it were deliberately closed. The first round of scarcity came from the shutdown itself. And then, the erratic reopening of the economy and supply chains led to the next phase of scarcity. Now, we're dealing with the pragmatic side of this phenomenon... It took time to recognize that the scarcity wouldn't immediately vanish after the pandemic. But as that reality came into focus... so did the painful reality of out-of-control inflation. The Fed had no choice. It needs to bring the money supply back in line with the supply of goods and services. That's the only way to cure demand-pull inflation. And higher interest rates (a higher price for money) is the inevitable result of lesser supply. But as painful as this approach is... it's working. Year-over-year growth in the Consumer Price Index ("CPI") is already dropping. Take a look... [Chaikin PowerFeed] If that were a stock's price chart, we would describe it as being "toppy." We would say the stock is encountering resistance and would likely fall moving forward. And of course, when it comes to inflation... that's exactly what we want. It's the start of a major shift. And it's happening because the Fed has been raising rates. Here's how the complete transition looked from 1979 through 1982... [Chaikin PowerFeed] Today's experience looks a lot like 1980. But we're starting from a lower peak this time. With that said, we're not totally out of the woods yet... A lot more pain could still occur. Looking back to the above chart of the early 1980s, you can see what I mean with the second shaded (recessionary) part. It lasted for more than a year. But importantly, the Fed is following a sound playbook. And it's working. So don't panic. Instead, I'll repeat what I said [on September 29](... Prepare for better days by monitoring cyclical stocks. Invest in stocks that are clearly breaking past current headwinds. And be ready to jump quickly into other great opportunities as the Fed's plan continues to play out. Good investing, Marc Gerstein Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 -0.34% 1 21 8 S&P 500 -0.70% 42 335 120 Nasdaq -1.00% 8 64 28 Small Caps -0.56% 259 1096 499 Bonds -1.56% — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are Bearish. Major indexes are mixed. * * * * Top Movers Gainers [rating] WBA +4.32% [rating] MRNA +3.44% [rating] MKC +3.30% [rating] MRK +3.29% [rating] MOS +3.19% Losers [rating] WYNN -12.24% [rating] BIO -8.39% [rating] NCLH -7.67% [rating] LVS -7.55% [rating] F -6.88% * * * * Earnings Report Reporting Today Rating Before Open After Close No earnings reporting today. Earnings Surprises No significant Earnings Surprises in the Russell 3000. * * * * Sector Tracker Sector movement over the last 5 days Energy +5.30% Industrials +0.14% Materials -0.87% Communication -1.28% Financial -1.28% Health Care -1.42% Staples -1.68% Discretionary -1.97% Information Technology -3.04% Utilities -5.28% Real Estate -6.92% * * * * Industry Focus Software & Services 14 101 74 Over the past 6 months, the Software & Services subsector (XSW) has underperformed the S&P 500 by -3.94%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #15 of 21 subsectors and has moved down 5 slots over the past week. Indicative Stocks [rating] AFRM Affirm Holdings, Inc [rating] TTWO Take-Two Interactive [rating] ZEN Zendesk, Inc. * * * * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, [click here](. 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