This 'Boogeyman' Is Here to Stay... And That's a Good Thing

Folks, we're still a long way from "normal"... China's slow exit from the pandemic left global supply chains in tatters. That meant limited stock of everything from groceries to semiconductors at the mercy of surging demand from other countries. [Chaikin PowerFeed]( This 'Boogeyman' Is Here to Stay... And That's a Good Thing By Vic Lederman, editorial director, Chaikin Analytics Folks, we're still a long way from "normal"... China's slow exit from the pandemic left global supply chains in tatters. That meant limited stock of everything from groceries to semiconductors at the mercy of surging demand from other countries. Then Russia invaded Ukraine – driving up global energy prices almost overnight. And enter the Federal Reserve... The central bank took us on a roller-coaster ride from an era of unprecedented low rates to the steepest, most vicious rate-hike cycle in decades. It was 11 rate hikes in less than two years for a total of 525 basis points. And since rates were coming from such a low base of 0.25%, the Fed effectively hiked rates 21-fold. By the end of 2023, inflation had been brought down by almost two-thirds from its June 2022 high of 9.1%. It was last recorded at 3.4% for December 2023. But instead of celebrating what is clearly a victory in the fight against inflation, the markets seem constantly on edge. Folks have been traumatized by the dizzying events over the past four years. Investors spook easily at the mere mention of stronger economic data that could lead to a rebound in inflation. It makes no sense at all. The truth is that we've become so used to low inflation that we've forgotten that the average inflation rate for the past 60 years is higher than recent levels. From 1960 to 2022, inflation averaged 3.8% per year. If we go back 100 years, the average inflation rate is a slightly tamer 3.1%. That's still not too far from the most recent figure. My point is that even if inflation stayed where it is today or rose to the level of its 60-year average, it shouldn't be cause for panic. The long-term picture tells us that everything is still OK. And as I'll explain next, we also have reasons to believe inflation will remain stable or come down further from recent levels... Recommended Links: ['I Found the Answer to Retirement']( A man from New York came forward with his unique story of how he retired early and worry-free WITHOUT stocks... thanks to ONE single idea that anyone can use. Now he sees 16%-plus annual returns with legal protections... and he NEVER has to worry about another market crash again. [Get the full story right here](. [Gold Is Headed Above $3,000 per Ounce (Here's How to Play It)]( With so many strange events happening across the economy (the longest bear market for bonds since the Civil War... unprecedented bank closures... and soaring prices), it's no wonder the richest investors are loading up on gold. But what you might not realize is there's a much better way to profit from rising gold prices – WITHOUT ever touching an ETF, mining stock, or even bullion. [Full details here](. The first reason is China, which is undergoing its slowest period of economic growth since the country joined the World Trade Organization more than 20 years ago. China is dealing with a real estate slowdown unlike any it has experienced before. And this has decimated its stock market. As I mentioned [last week]( it's a roughly $6 trillion market rout that began back in 2021. Slower growth in China means weaker demand for everything from copper to iron ore by the world's No. 1 consumer of base metals. The next reason is energy prices, which have been stable despite the situation in the Middle East. Recent attacks from the Iran-backed Houthi rebel forces in Yemen have forced oil tankers transporting about 10% of global oil supplies to reroute away from the Red Sea. That has added extra weeks to the tankers' travel time. However, this is being offset by worries about China – the country is the second-largest oil consumer, but its economy is in trouble – and soaring U.S. oil production. Lastly, real interest rates in the U.S. are among the highest levels we've seen in the past 20 years... The real interest rate is the yield on the U.S. Treasury adjusted for inflation. It tells you how much you're left with after taking into account inflation's effect on your yield. A high positive real interest rate, like what we have today, increases the appeal of keeping money in the bank – where it can generate positive real returns without risk to businesses and investors. In the chart below, you can see that while real interest rates are down from the peak last year, they're still much higher than they have been for most of the past couple decades. Take a look... [Chaikin PowerFeed] Sure, inflation has been made out to be this "boogeyman" that all of us need to be constantly worried about. I disagree. Of course, overly high inflation isn't good. But inflation in general forces companies and investors to be more careful with how they utilize their capital. It raises the cost of money. And in doing so, it puts pressure on companies and investors to find ways to generate higher returns for every dollar spent. Looking ahead, that should be a good thing for the U.S. economy and the stock market. Good investing, Vic Lederman Market View Major Indexes and Notable Sectors # Hld: Bullish Neutral Bearish Dow 30 +0.18% 14 16 0 S&P 500 +0.04% 183 238 77 Nasdaq +0.19% 51 39 9 Small Caps +1.52% 548 984 386 Bonds -0.6% Energy +1.03% 3 9 11 — According to the Chaikin Power Bar, Large Cap stocks and Small Cap stocks are Bullish. Major indexes are mixed. * * * * Sector Tracker Sector movement over the last 5 days Communication +3.16% Discretionary +2.54% Information Technology +2.45% Industrials +1.71% Energy +1.45% Health Care +1.36% Financial +0.39% Materials -0.74% Staples -0.83% Real Estate -1.26% Utilities -4.12% * * * * Industry Focus Homebuilders Services 27 8 0 Over the past 6 months, the Homebuilders subsector (XHB) has outperformed the S&P 500 by +3.74%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #2 of 21 subsectors. Top Stocks [rating] LEN Lennar Corporation [rating] CCS Century Communities, [rating] DHI D.R. Horton, Inc. * * * * Top Movers Gainers [rating] RL +16.79% [rating] MPWR +14.2% [rating] DIS +11.5% [rating] WRK +8.08% [rating] TPR +6.54% Losers [rating] PYPL -11.24% [rating] SNA -9.67% [rating] FLT -9.2% [rating] EG -7.65% [rating] BWA -6.95% * * * * Earnings Report Reporting Today Rating Before Open After Close MLM, UBER CTLT, GNRC, GPN, IQV, KO, PEP, ZBRA ACGL, DVA, IFF, RSG No earnings reporting today. Earnings Surprises [rating] ILMN Illumina, Inc. Q4 $0.14 Beat by $0.13 [rating] VRSN VeriSign, Inc. Q4 $2.60 Beat by $0.74 [rating] TTWO Take-Two Interactive Software, Inc. Q3 $0.53 Missed by $-0.19 [rating] MAS Masco Corporation Q4 $0.83 Beat by $0.17 [rating] NET Cloudflare, Inc. Q4 $0.15 Beat by $0.03 * * * * 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](. You’re receiving this e-mail at {EMAIL}. 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