If you’ve been following me for a while now, then you’ve probably heard me state that “fear sells,” and that we need to be wary of the fearmongering media. The fact is the financial media likes to cherry-pick the “facts,” focusing on the scariest points and ignoring those that might contradict or quell Wall Street’s and Main Street’s concerns.

However, just because the facts are ignored doesn’t mean that they don’t exist. So in today’s Market360 article, I’d like us to take a closer look at some facts I shared in my Breakthrough Stocks Monthly Issue for April surrounding the current economic climate, as a lot of folks are worried about a potential recession here in the U.S.

Fact: The yield curve has flattened and briefly inverted, which historically has been a precursor to recession in the U.S. In the final trading days of March, the important two-year Treasury vs. 10-year Treasury yield curve briefly inverted. This inversion typically precedes a recession. In fact, our friends at Bespoke recently pointed out that when the two-year and 10-year Treasury yield curve inverts, there’s a more than 67% probability that the U.S. will fall into recession in 12 months and a more than 98% probability that a recession will occur in the next two years.

Fact: The Federal Reserve cannot fight market rates. Part of the reason for the most recent yield curve inversion is that the Fed started raising rates. It is inevitable that the Fed will continue to raise key interest rates, most likely in 0.5% increments, to better align with market rates. However, this can have a negative impact on the U.S. economy, as higher rates weigh on economic growth. As an example, as the central bank lifts rates, it effectively “pricks” the housing bubble; the National Association of Realtors recently revealed that pending home sales declined 4.1% in February. As mortgage rates have risen, pending home sales have dropped for four-straight weeks.

The reality is that it is very hard for the Fed to engineer a “soft economic landing” when intermediate Treasury yields soar. Personally, I cannot remember the last time the Fed successfully engineered a soft economic landing. If the Fed can avert a recession and engineer a soft landing for the U.S. economy, I will give them full credit for their actions. Right now, though, the tail (e.g., intermediate Treasury yields) is wagging the dog (e.g., the Fed), so we have a series of interest rate hikes to look forward to until the Fed is more in-line with market rates.

Fact: Inflation remains at historically high levels. The Fed is also raising key interest rates in an attempt to combat surging inflation here in the U.S. The Fed’s favorite inflation indicator, the Personal Consumption Expenditure (PCE) index, rose to a 6.4% annual pace through February. Core PCE, which excludes food and energy, is now running at a 5.4% annual pace. The Fed still wants to see PCE closer to its 2% annual target, but I expect it will be at least 2023 or later until it reaches that inflation goal.

Fact: Consumer confidence is unusually strong. Recently, the Atlanta Fed revised its first-quarter GDP estimate to 0.9%. That compares to recent estimates for 1.5% but is better than mid-March estimates for 0.5% GDP growth. Still, that’s a big deceleration from the 6.9% annual pace in the fourth quarter. Interestingly, despite U.S. economic growth tapping the brakes, rates rising and inflation soaring, American consumers are actually fairly optimistic.

The Conference Board recently reported that its Consumer Confidence Index rose to 107.2 in March, up from 105.7 in February. The Present Situations component rose to 153 in March, compared to 143 in February. The Expectations component did decline to 76.6 in March, down from 80.8 February. But overall, consumers are in much better shape than I anticipated – and that’s a good sign that the U.S. economy could avoid a recession if consumer spending remains strong.

Fact: An inverted yield curve points to a higher stock market in the next month, three months, six months and one year after the inversion. The folks at Bespoke also pointed out that the stock market tends to rally following a Treasury yield curve inversion. In the six instances when the yield curve inverted between 1978 and today, the S&P 500 was higher two-thirds of the time in the following month, as well as three months, six months and 12 months later.

Overall, whether the U.S. economy will slip into a recession remains too close to call right now. Yes, an inverted yield curve is a bad sign, but strong consumer confidence is a good sign that the U.S. may be able to skirt a recession. Personally, I don’t expect the U.S. economy to fall into a recession in the second quarter; the economic data doesn’t support a downturn at the moment.

With that said, even if the U.S. economy were to slip into a recession, there’s still plenty of money to be made in the stock market – and history is pointing to a higher stock market in the wake of the yield curve inversion. Frustrated bond investors are already pouring into stocks. Other investors are seeking to offset rising prices by focusing on strategic inflation hedges. In Breakthrough Stocks, I have aligned our Buy List to profit from inflation and the influx of investors returning to the stock market.

5 Stocks To Profit From Inflation

As I’ve discussed in previous Market360 articles, I’ve spent the past few months in Breakthrough Stocks to load up on energy, food, shipping and semiconductor stocks, as they’re all set to benefit from the recent surge in inflation. As a result, we’re already well-positioned even if the U.S. economy would slip into a recession.

On Friday, I added four new recommendations that should prosper in the current environment. And then yesterday, I added a fifth stock. It is the epitome of a Breakthrough Stock: It is backed by superior fundamentals, positive analyst revisions and persistent institutional buying pressure – and it’s benefitting immensely from soaring energy prices.

For the full details, become a Breakthrough Stocks member today. Not only will you have full access to all of my stock recommendations, but you can review my latest Top 5 Stock list – also released on Friday. These stocks represent the crème de la crème and the best buys after my new recommendations. You can also read my latest report: 5 “Grade A” Stocks That Could Deliver 10 Times Your Money and The Portfolio Grader 500.

If you’re interested, sign up here.

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