[Market Outlook] Through the Roof

Where to Invest Now? [Company Logo] Through the Roof Where to Invest Now? By Keith Schneider and Donn Goodman Having grown up in the ‘60s and attended college in the late ’70s, I vividly remember my father telling me, “Cost of everything is going through the roof”. It was an often-used sentence by people living in the ’70s. That was the last time inflation was this out of control. [image] Take a look at a sampling of extraordinary year-over-year price increases that consumers are now faced with daily: Groceries +11.9% (Largest since 1979) Chicken +17.4% Restaurants +9% (Largest ever) Fuel oil +107% (Largest ever) Electricity +12% (Largest ever) Rent +5.2% (Largest since 2006) Airfare +37.8% (Largest since 1987) Important Market Insight From Friday’s Bear Market Trend Continuation Day As you probably know, in rational times, the biggest stock and bond investors tend to make their investment decisions based on their view of the earnings outlook 6-12 months in the future rather than what’s happening today. On Friday, many of them changed their view of the future. To that end, for the better part of a year, in this Market Outlook, we’ve been saying that “something is not quite right.” Mish has also been warning of an upcoming period of worrisome stagflation in her regular TV appearances and in her Mish’s Daily commentary. Stocks hate stagflation. In last week’s Market Outlook, “[Economic Storms Ahead? What To Do To Protect Your Investments]()”, we highlighted the same feelings of concern about the economy and inflation being expressed by Janet Yellen and two high-profile CEOs. While these were just “statements” to some, they represent what veteran market participants might call “animal spirits.” As you just read in the inflation statistics above, it’s easy to see now that there’s a problem with inflation. The next likely hot topic will be GDP growth (or lack thereof). We’ll come back to growth later (below) because Friday’s market pounding was related to inflation more than GDP growth. When the market faces very bad (i.e. record breaking) news as we’ve experienced for months in the inflation data, forward thinkers (big institutions) begin to look for evidence of a turning point. When it comes to the inflation problem, one turning point in “Wall Street slang” is “peak inflation.” You may have heard the term discussed in the media as it has become a somewhat popular idea. As of Thursday of last week, there was a substantial segment of the market that believed that, while inflation was very negative for stocks, it had peaked at 8.3% in last month’s report. On Friday, the government released May’s inflation data (CPI), and it proved that inflation didn’t peak at the 8.3% level. The “inflation has peaked” believers were expecting a better monthly and year-over-year number. The report, however, was a hotter 8.6% YOY number. Even worse, the monthly number was 1.0% versus the estimated 0.60%. If you do the math, that is an annualized number of approximately 12%. Friday’s big move lower in the market reflects an unwinding of the widespread belief that inflation had peaked. Considering the very bearish price action, it may take more than one day for the market to digest the unexpected news. Mish appeared on TD Ameritrade TV on Friday, and she did an [outstanding job of explaining that inflation]() is well above the 12% rate. The ex-Food & Energy number moderated to 6% annualized inflation. After the CPI data release, I saw a replay of President Biden at a press conference from LA telling the public that ex-food & energy moderated. Are they kidding? Who goes through life without Food & Energy? As my father used to say, “Gasoline and Food costs are going through the roof.” Remember from above… Groceries +11.9% (Largest since 1979) Fuel oil +107% (Largest ever) More specifically, see the price of gasoline futures below: [image] You will notice that the price of gasoline (futures) has gone from $2.20 at the beginning of 2022 to approximately $4.17, almost a 100% increase, and that’s not even a whole year’s change. Please note that the price of futures is what the core price of gasoline is before it is processed with various leaded components, before distribution costs, before Federal and State taxes are imposed and before dealer profit is priced in. (gasoline stations). Given the actual shortage that the US is now experiencing from demand, global supply issues, and the boycotting of Russian oil, the price may continue rising even though the National average is now at $5.00 a gallon or more. I recently paid close to $6 a gallon this week for Premium Unleaded in Ohio. Of course, rising interest rates along with Friday’s terrible inflation numbers led to a two-day rout in the stock market. It stopped the short-term rally we were experiencing dead in its tracks and contributed to the market closing down for 9th of the past 10 weeks. Folks, this is what a bear market looks like, and yet it’s not officially be labeled one because the S&P has yet to close down 20%. A close under 3800 would be the official number to declare a “media official” bear market. But ask any investor who has seen this show before, and they’ll likely agree….we’re there. For example, in bear markets, it’s typical to see negative 2-3% fast losing days. As we have explained numerous times, you will get fierce and dramatic corrective waves up. We just experienced a 7% corrective wave up, followed by two bear market trend continuation days DOWN. With rising prices (especially gasoline) and rising interest rates, we are in for an extended period of STAGFLATION. Click below to continue reading about the Fed’s stagflation dilemma, a potentially more significant problem in credit card debt, where to invest now, and our Big View market highlights in bullets and video. [Click here to continue to the FREE analysis and video.]( [Click here to continue to the PREMIUM analysis and video](=). Best wishes for your trading, Keith Schneider CEO MarketGauge Get more - follow us here... 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