If you polled investors about their biggest market concerns today, it’s likely you’d find the same answer at the top of that list … Inflation. The reason why is simply — a tsunami of dollars flooding the economy over the last 12 months, with more on the way. But there’s one analyst who not only isn’t concerned about inflation, he believes “we’re due for a lifetime of muted inflation.” How? That’s what Luke Lango will answer for us in today’s Digest. For newer Digest readers, Luke is our hypergrowth expert, and the analyst behind Hypergrowth Investing. His specialty is finding market-leading tech innovators that are pioneering explosive trends. It’s a lucrative approach to the markets. To illustrate, in just the past five years, Luke has recommended 17 different 1,000%+ gaining stocks. Most investors never enjoy even one such 10X-winner. Turning back to inflation, if anyone should be worried, it’s Luke, since tech stocks tend to react poorly to rising rates. But as he writes below, “I am not worried about inflation at all.” Today, let’s find out what’s behind Luke’s confidence. I’ll let him take it from here. Have a good weekend, Jeff Remsburg

 

Stimulus Checks Will Kill the Inflation Trade

By Luke Lango

Longtime Hypergrowth Investing readers know that I’m not at all concerned about inflation. Like … at all.

While all I’m hearing these days from mainstream media and Wall Street analysts is how inflation is just around the corner, there’s really nothing to fear. Yet, such fears are spilling over onto Main Street.

According to research from Deutsche Bank, Google search interest related to “inflation” spiked recently to its highest levels in over a decade.

But guess what? You see those first two spikes back in 2008 and 2011. Yeah … they didn’t amount to anything. Wall Street freaked out about inflation, Main Street “Googled” inflation, and … inflation never showed up. In 2008, after that initial spike in search interest, inflation never broke 2.5%; and in 2011, inflation topped out at 2% for a few months. Truth be told, inflation has not sustainably topped 3% since 1990, nor has it topped 2% since 2010.

As I said time and time again, I am not worried about inflation at all.

That’s because of the ever-expanding deflationary influence of technology — and, more specifically, the internet — plus reinvigorated corporate interest in globalizing supply chains plus the expanding wealth gap, which saps out consumer firepower for all things that aren’t fine art, luxury cars, or multi-million-dollar homes.

I think we’re due for a lifetime of muted inflation ahead.

But, beyond that big picture, I am concerned that some spurts of temporary inflation here in Q2 will freak out investors and cause a totally unnecessary panic on Wall Street.

However, recent data illustrates that this temporary inflation spike may actually be much milder than most expect — and that’s because of the rise of the retail trader.

You see … a big part of the “inflation is coming” thesis is that consumers are going to take their stimulus checks and pump them into the physical economy via shopping sprees, vacations, fancy dinners, etc. Such increased demand for physical goods, coupled with a shortage in supply for physical goods thanks to Covid-19 restrictions in the global supply chain, would lead to a huge, albeit temporary, price surge.

A major risk to that thesis? Consumers don’t spend those checks. They invest them — in bonds (which would push down yields), in stocks (which would push up prices), and in cryptocurrencies (which would push up prices).

Apparently, that is exactly what’s going to happen …

According to a Harris poll, 57% of Americans plan to save and/or invest their stimulus checks. According to a Mizuho poll, 35% of Americans will invest their stimulus checks in either stocks or Bitcoin. According to a Deutsche survey, younger consumers — the 25-to-35-year-old crowd — will spend 50% of their checks on stocks.

So much for those shopping sprees, vacations, and fancy dinners.

Those can wait. The U.S. consumers believes now is the time to make money — not spend money.

Why? I can’t tell you definitively — but my hunch is that retail traders have a ton of “mojo” right now.

In essence, they aggressively bought the dip in stocks and Bitcoin back in March/April 2020. Their contrarianism paid off. They’ve made a very pretty penny ever since. Now, they’re confident. They’re bullish. They’ve made money by buying the dip before — they’re ready to make more money by buying the dip again.

We have yet another big dip in some of Wall Street’s favorite names right now. These retail traders are stepping up to the plate. They’re playing the contrarian again, this time with stimulus money, and buying the dip.

So, yes, prices will surge after these stimulus checks go out. But not on Main Street. On Wall Street. Inflation readings will be milder than expected in Q2/Q3, and stock prices on Wall Street will move higher.

Am I 100% confident in that assessment? No. I’m still leaving room for more noise because these next few months are unchartered territory for everyone. No one knows exactly what inflation will look like when lapping against an economy that was completely shutdown a year ago.

But …

I am 100% confident in saying that, medium- to long-term, inflation will not be a problem. Inflation rates will remain below 2% for the next decade, and as such, any near-term weakness in high-quality tech stocks on the back of inflation fears in 2021 is a great buying opportunity.

Which is precisely why I remain bullish on a number of hypergrowth, innovative megatrends across the board. These include stocks such as my “sleeper” EV pick of the decade.

Or the “secret startup” that is spearheading the autonomous vehicle revolution.

Even my no. 1 tech stock, which reminds me of a young Amazon.

If you’re interested in getting my full portfolio of the best stocks to buy, click here.

Sincerely,

Luke Lango
Editor, Hypergrowth Investing