A Large Variable in the Inflation Equation

The Chinese economy is booming... A familiar reopening story, but in Asia... A large variable in the inflation equation... A return to normal, with a caveat... This will be a big story... Don't miss Dan's new event... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The Chinese economy is booming... A familiar reopening story, but in Asia... A large variable in the inflation equation... A return to normal, with a caveat... This will be a big story... [Don't miss Dan's new event](... --------------------------------------------------------------- Oh, and about China... This week, we've talked about how inflation appears "sticky" [in the U.S.]( and [in Europe](. The takeaway: Even if the pace of inflation is slowing, it will likely be a bumpy road and not a straight path to palatable levels for the world's central banks. Today, I (Corey McLaughlin) want to talk about another big part of the global inflation equation: China... The world's second-largest economy is showing major signs of growth after the Chinese government relaxed its "zero-COVID" policy toward the end of 2022... We're already seeing a rebound in China. Today, Chinese officials reported the country's manufacturing activity just grew at its fastest rate in more than a decade... China's manufacturing purchasing managers' index ("PMI"), a widely followed measure of factory activity, came in at 52.6 in February. That's up from 50.1 in January and higher than analyst expectations. These figures are based on a monthly survey of 700 Chinese manufacturing businesses. This is a big move for this index, and it's the highest reading since April 2012. Other data showed construction and services sectors growing substantially, too. In other words, it looks like the Chinese economy boomed last month. This is a good sign for the Chinese. And stock markets across Asia have been responding in kind to the country's reopening, with China's benchmark index up 6% year to date. But it's not all good news... For the global inflation story, it's a mixed bag leaning toward bad, if anything. It's sort of like what happened in the U.S. – but two years later... Think back to 2021 for a moment... COVID-19 vaccines had just begun hitting people's arms, and folks started getting out more. Meanwhile, stimulus checks and near-zero interest rates continued to juice the economy. People had money to spend, but lockdowns all over the world had hobbled global supply chains. Inflation grew quickly, and the Federal Reserve refused to do anything about it – or even admit it was happening – until later in the year. The result: 40-year-high inflation... China's economy getting back on its feet has many impacts... Of course, China's economy is a bit different from the U.S... Primarily, the Chinese make a lot of the stuff Americans buy, such as electronics and apparel. I mentioned this last month when parsing the latest U.S. inflation data in January's consumer price index ("CPI") report. Even the start of China's reopening began to show up in American inflation. From [the February 14 Digest](... Americans paid nearly 1% more for apparel in January, an unusually high increase and higher than it had been in at least six months. Can you guess who supplies most of the apparel bought in the U.S.? China, whose economy is "reopening" after a bout with COVID-19. This dynamic could possibly stoke worldwide inflation... It's something to keep a close eye on. In a way, if China can once again flood the global economy with products on shipping containers moving as they always did, maybe we won't hear of supply-chain crises for a while. It's a return to 'normal,' with an inflationary caveat... No matter what you think of the Chinese government and how it operates (like, ahem, the spy balloons), functioning Chinese businesses provide some stability in the global economy. A Chinese reopening will help meet demand for various products globally, which would help bring down prices. But – and this is probably the larger inflationary "but" – it will also likely stoke demand within its borders for things like energy and food... two of the largest drivers of worldwide inflation. China is the world's largest consumer of many commodities, including approximately 60% of the world's soybeans. And the U.S. imported $135 billion of electronics and electrical equipment from China in 2021, along with $40 billion of toys and sporting goods. That's even coming from a period when the Chinese economy was below its peak strength due to COVID-19 lockdowns. On one hand, a greater supply of Chinese goods on the global market (given similar demand) could help ease some inflation. But on the other hand, demand from the Chinese for other goods and services could contribute to higher inflation all over the world. If this dynamic contributes enough to global inflation rates, it could mean another reason for the world's central banks to raise interest rates. The Fed's preferred inflation measure remains above 5%. If inflation remains above the Fed's (arbitrary) 2% long-term goal, a cascade of events beginning in China might spark the worst result of central banks' inflation fights: an economic recession. And even if this does nothing to change the Fed's plans, a rebounding Chinese economy will have an effect on the U.S. and other countries one way or another. This is the trouble with trying to manipulate a $26 trillion economy... That's just the size of the U.S. economy. In practice, there are too many moving parts. That's why you hear Fed officials like Jerome Powell always say monetary policy is a "blunt" tool... If you've ever used one of those in real life, you know it often makes a mess. One way or another, the shifting winds in the global economy will show up in the financials of businesses... It's sort of like when retailers stockpiled anything they could get from China when supply chains were an issue, then sold off some of the backlog at a discount. Now, it might be the opposite... With China's reopening in particular, I'd also keep an eye on its potential longer-term influence on energy and other commodity prices, too... Copper futures, for instance, were up roughly 1.5% today... So was corn... And oil prices were up about half a percent. The U.S. benchmark S&P 500 Index was down slightly today and is trading just above its 200-day moving average like on Friday... but the energy sector was up 2% and materials up almost 1%. This China story is going to be a big one that plays out in the markets, whether anyone knows about it today or not... Does it mean the pace of inflation will increase? Not necessarily. But does it mean prices of certain items might stay higher for longer than others? I think so. It's actually why – without giving too much away – our colleague Dan Ferris will discuss this same China topic in [his brand-new video event tomorrow](... So, if you want to hear more about what China's reopening might mean for the markets, stocks, bonds, and more... be sure to tune in to that free event. Dan will get into more detail, and he'll offer up investing ideas you can put to work right now in your own portfolio. It's all because of a rare but predictable "market event" that has been about 50 years in the making, which Dan says he sees playing out soon. And you'll want to hear why... The last time we saw a setup like this, you could have made 1,000 times your money in the right investments. [Click here to sign up for this free event right now](. This Is the End of the Experiment "I think there's going to be a crisis this year," warns Lynette Zang, chief market analyst for ITM Trading. "I don't think there's going to be a soft landing. I don't think there is a disinflation. I think there's going to be a hard landing." [Click here]( to watch this video right now. For more free video content, [subscribe to our Stansberry Research YouTube channel](... and don't forget to follow us on [Facebook]( [Instagram]( [LinkedIn]( and [Twitter](. --------------------------------------------------------------- Recommended Links: [Here's What Stansberry Research Is Watching Tomorrow (March 2)]( It has only appeared in the market twice in the past 50 years. And you could have made a 424% gain on the LOWEST-risk investment available the last time we saw it. This is why Stansberry's longest-tenured analyst calls it "THE biggest – and perhaps most obvious – setup I've seen in my entire career." [Click here to learn more](. --------------------------------------------------------------- ['The EXACT Day Stocks Will Finally Bottom']( Goldman Sachs doesn't know... Bank of America doesn't know... Morningstar doesn't know... but Marc Chaikin believes he does. He called the bottom in 2020, just 24 hours before the fastest bull market in history. Now, Marc has spotted the NEXT market bottom... and he's sounding the alarm. Plus, he's sharing the names of what he says will be the best- and worst-performing stocks of 2023. [Click here for the full details](. --------------------------------------------------------------- New 52-week highs (as of 2/28/23): Copart (CPRT), indie Semiconductor (INDI), Luna Innovations (LUNA), and MYR Group (MYRG). In today's mailbag, thoughts on the Federal Reserve and a few kind words... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. 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All the best, Corey McLaughlin Baltimore, Maryland March 1, 2023 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 897.7% Retirement Millionaire Doc ADP Automatic Data 10/09/08 785.6% Extreme Value Ferris MSFT Microsoft 02/10/12 770.8% Stansberry's Investment Advisory Porter WRB W.R. Berkley 03/16/12 584.9% Stansberry's Investment Advisory Porter HSY Hershey 12/07/07 573.7% Stansberry's Investment Advisory Porter ETH/USD Ethereum 02/21/20 567.7% Stansberry Innovations Report Wade AFG American Financial 10/12/12 443.9% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 441.1% Retirement Millionaire Doc ALS-T Altius Minerals 02/16/09 312.5% Extreme Value Ferris FSMEX Fidelity Sel Med 09/03/08 303.2% Retirement Millionaire Doc Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 4 Stansberry's Investment Advisory Porter 3 Retirement Millionaire Doc 2 Extreme Value Ferris 1 Stansberry Innovations Report Wade --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst ETH/USD Ethereum 12/07/18 1,307.0% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,179.3% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,060.5% Crypto Capital Wade MATIC/USD Polygon 02/25/21 945.3% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 515.3% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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