The Fed Needs to Answer This Wakeup Call

[TradeSmith Daily]( The Fed Needs to Answer This Wakeup Call Stock and bond markets got a big boost earlier this week when San Francisco Fed President Mary Daly signaled that the Fed should consider slowing down its breakneck pace of interest rate hikes. In a speech at the University of California Berkeley, Daly said, “The time is now to start planning for stepping down.” That’s a clear reference that the Fed should consider slowing the pace of rate increases, which have been coming in 0.75% increments for the past several Fed meetings. And it’s significant because it is the first time in the current rate hike cycle that ANY Fed official has publicly “blinked” about the need to raise rates. And it’s about time! Since the Fed began hiking rates this year – long after inflation began accelerating early in 2021 – it has tried to make up for its slow start. In just six months, the federal funds rate has gone from zero to 3%. As you can see on the chart above, that is a faster AND a steeper pace of rate hikes than at any time in modern history. RECOMMENDED LINK [Wow. $980 instantly? Here’s how...]( Keith Kaplan was one of the WORST investors you’ll ever meet... But this year his [counter-intuitive new strategy]( has dominated everyone and everything else with an unheard of 89.47% WIN rate. That’s because he’s not investing the traditional way. His new method has nothing to do with “buy and hold” or timing the market... In short: it’s a new way to trade and potentially make all the money you need — no matter what happens in the stock market. Sound too good to be true? [Keith reveals everything in this new video... including an “over the shoulder” demo of how the system works](. Of course, inflation is higher now than at any time in the last 40 years, so the Fed feels that its actions, although badly delayed, are justified. But the truth is, higher interest rates take time to work through the economy. And it takes longer still for inflation, a lagging indicator, to noticeably decline as a result. But there are signs that the Fed’s rate hikes are already working to slow the economy, increase financial stress in markets, and even bring down inflation — IF you look at the right indicators. Hat tip to professional economist turned blogger Scott Grannis for the illuminating charts above and below. The one above clearly shows that the six-month annualized rate of change in the Producer Price Index (PPI) of inflation is already declining significantly. Producer prices are input costs that businesses pay for everything from raw materials to shipping costs to payrolls. And it is typically a very accurate barometer for the direction of consumer price inflation. The growth rate for PPI peaked at just over 25% and has since fallen significantly to a rate of just over 5% today. Declining producer prices haven’t shown up just yet in the Consumer Price Index (CPI) data. But easing cost pressures will soon filter down into the CPI numbers, solving the Fed’s inflation problem for it. RECOMMENDED LINK [Bitcoin won't make you rich]( Some people believe Bitcoin will make you rich... But they’re wrong. That wave has already been missed. And now the man who picked Bitcoin at $369 all the way back in 2014... Has his sights set on a [small $2 coin set to soar in the next crypto bull run]( which could start as soon as November 1st. This coin is at the forefront of a $30 trillion shock wave set to hit the market, and the world’s smartest billionaire investors like Jeff Bezos, Mark Zuckerberg, Mark Cuban, and Bill Gates are all moving their money as we speak. There is no time to waste. [Click here to learn all the details]( Another signal that inflation should soon be on the retreat is the declining growth rate in the M2 money supply, shown in the chart below. M2 money supply is a broad measure of the money circulating in the U.S. economy. It typically fluctuates up and down along with the business cycle of expansion and contraction. But notice the unprecedented spike higher in the growth rate during the COVID-19 pandemic. M2 growth exceeded 40% at one point in 2020, as the government shelled out trillions of dollars in stimulus and direct payments to American workers and businesses that were suddenly shut down. That flood of money set us up for the inflation we’re drowning in right now. But the rapid inflow of dollar bills has since dried up — which means inflation should too. You can clearly see that as the impact of the pandemic faded, so did the need for stimulus. The money supply growth plunged more recently, with M2 growth now at a negative 2.2% annual rate in the last six months. No more off-the-charts money growth, no more inflation. It’s really that simple. Given all this real-time evidence that inflation is fading already, I applaud Mary Daly for sounding the wake-up call for the Federal Reserve to take a “victory lap” on inflation and slow down the pace of rate hikes. Let’s just hope she isn’t the only voice of reason within the Fed. Good investing, [Mike Burnick]Mike Burnick Senior Analyst, TradeSmith Final Thoughts: Whatever the Fed decides to do will always be out of our hands, but what is under our control is taking responsibility for our financial wellbeing. Because when it comes to investing, not only have I been around during the dot-com crash, the Great Recession, and every new investing fad that has come and gone since then... I’m also here to still tell the tale. While so many others were shaken out of this business during the tough times, so many folks still turn to me because I have a straightforward, reliable way of generating income, no matter what way the market is moving. Let me share a little bit more about how you can [start following my income-producing investment moves as soon as today](. Best of TradeSmith The chart below represents the best-performing open positions over the last two years, as recommended by our software. [Download now on the Apple Store]( [Get It On Google Play]( [866.385.2076](tel:+866-385-2076) | support@tradesmith.com ©TradeSmith, LLC. All Rights Reserved. You may not reproduce, modify, copy, sell, publish, distribute, display or otherwise use any portion of the content without the prior written consent of TradeSmith. TradeSmith is not registered as an investment adviser and operates under the publishers’ exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith’s content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. 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