All the evidence points to this⦠[TradeSmith Daily]( The Inflation Report Is a Gift in Disguise
By Lucas Downey, Contributing Editor, TradeSmith Daily Oh no, inflation is back! Or is it… The mainstream media will have you believe we have an inflation problem after Januaryâs hotter-than-expected reading. Expectations called for 2.9% year-over-year price gains, yet the Consumer Price Index jumped to 3.1%. This sent stocks plunging, with the small-cap Russell 2000 off over 4%. But if youâre feeling skittish about stocks, Iâve got some cold, hard data for you to chew on. Today, weâre going to unpack the real inflation story… what it means for the Federal Reserve… and ultimately what itâll likely mean for your portfolio. Before you hit the sell button, consider the following facts… Because theyâll make that nasty inflation print look like a gift in disguise. RECOMMENDED LINK [âAI TVâ Could Change Your Financial Future â FOREVER](
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[Go Straight to the Exciting Story...]( The True Path of Inflation
To say inflation âspikedâ is a bit of an exaggeration. While the January Consumer Price Index (CPI) did indeed rise above the 2.9% expectations, a 3.1% lift isnât the end of the world. In fact, when you review all monthly CPI readings since 2021, youâll notice that January came in at the second-lowest reading since March 2021, when prices rose 2.6%. Thereâs a lot of quibbling these days about the future path of inflation, but donât get too caught up in the weeds. The path of least resistance is lower. Below illustrates this beautifully. Not only has inflation tamed since peaking in June 2022 at 9.1%, but itâs stayed low ever since:
The balloon we watched inflate for nearly a year has deflated. This shows us inflation isnât spiking… itâs just stubbornly flatlining. Thatâs why we should focus on the longer-term trend. Inflation is way down from its highs, and you can thank Fed policymakers for that. Back in July 2023, the Fed finally ended its hiking campaign, taking Fed Funds interest rates well into restrictive territory at 5.50%. Two months later, we put out a great research piece highlighting [how stocks perform after the final rate hike](. Armed with data, we told you to prepare for upside. Hereâs an update on that study, including Julyâs final rate hike and the returns since we published it. Once the final hike is in, the S&P 500:
- Lifts 3% three months later
- Jumps 8.1% six months later
- Rips 15.7% 12 months later Clearly, the 9.4% drop we experienced in the three months following last Julyâs hike didnât fit in line with history. Instead, we got one of the [greatest bear-killer signals]( right around that time, which helped the S&P 500 rise 8.1% in the six months after Julyâs final hike. But that was then. What about now? Well, if you think Iâm going to become some angry bear, think again. Knowing that the inflation fight is in the bag for the Fed, the next move is clear, and inevitable… RECOMMENDED LINK [One-Percenter turns the tables on the wealthy](
Heâs sharing their secret strategy for extracting big income (far more than dividends pay!) from ordinary stocks. Itâs why his weekly pay is over six figures, but heâs not keeping this tactic a secret any longer. [Anyone with an Internet connection and a few minutes to spare can take advantage](. The Major Takeaway from Januaryâs Inflation Reading
As they say on Wall Street, itâs not where we are that matters, itâs where weâre going. Focusing on inflationâs tiny tug-of-war is missing the forest for the trees. The Fed has already pivoted and signaled that cuts are coming. The timing isnât exact, but most analysts see the first cuts coming as early as the middle of 2024. Letâs now visit history and gauge what that means for stocks… Since 1921, the Dow Jones Industrial Average (DJIA) clocks in a market-beating performance once the Fed eases. After the first Fed rate cut, the DJIA:
- Rips 10.2% six months later
- Soars 15.2% 12 months later This right here is the price regime weâre entering. Rate cuts could be delayed, but theyâre the next piece of the inflation puzzle. So, donât let scary headlines spook you out of stocks. One look at the true path of the CPI tells you all is OK. Itâs not IF the cuts are coming, itâs WHEN. Thatâs why using data is so important. It takes the emotional ebbs and flows out of investing. Having a data-based approach allows TradeSmith to stay a step ahead of markets… isolating the best stocks out there. Get started today! Regards, Lucas Downey
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