On Monday, the market broke its streak from last week and closed 1.27% lower than it did the week before.
Inflation, as expected, spoiled the sentiment; officials from the U.S. Federal Reserve were far bolder last week than we had expected as they discussed their plans to fight inflation by hiking rates significantly.
Earnings announcements and global crises like that in Ukraine have sown more volatility in the market — a status we’ll have to continue to bear.
The Consumer Price Index (CPI) was released Tuesday, and it was a doozy. Inflation is up from 7.9% in February to a whopping 8.5% — the steepest rise in 40 years! The Federal Reserve’s target inflation rate is 2%, and we’ve had six months of inflation higher than 6%, according to the Wall Street Journal.
However, this is not all doom and gloom.
While energy and food prices shot up, other sectors, like the automotive industry, have cooled. Wages continue to inflate in a tight job market with a new, low 3.6% unemployment rate. Economists expect the inflation trend to decrease… but stay well above that 2% target into 2023.
We’re going to get creative while formulating the best plan of attack to continue profiting. This week and going forward, we’re exploring how to make the best bets in an inflationary environment.
Monday’s Livestream: Is There a Way to Profit from Inflation?
Inflation has a big impact on bond prices — and it’s almost always negative. If you are looking for a great way to profit from inflation, learn to short bonds. It’s easier than you might think using Bond Exchange Traded Funds (ETFs) and options on ETFs. Catch up on Monday’s recording here.
Tune in tonight at 7:00 p.m. ET for our next livestream. Set a reminder here.
Wednesday: Keeping an Eye on Consumer Spending Habits Before We Head into a Long Weekend
The S&P 500 has been dropping all this month, but Wall Street has proven it is still interested in hedging its inflation risk by buying U.S. stocks.
Volatility has been ever-present, and we think that has everything to do with Wall Street’s confidence — or lack thereof — in the Federal Reserve. Wall Street knows the Fed has to raise rates to fight inflation. Traders aren’t afraid of rising rates on their own. What they are afraid of is rising rates killing growth in the U.S. economy.
We’ll be getting more earnings numbers from banks this week, but we think the more important numbers are going to come from the big technology companies and consumer discretionary companies in the coming weeks. We’ve been focusing on stock picks from these sectors, and it’s likely we’ll continue to do so in light of those reports. Stay tuned to see if those spending habits translate into profits for traders.
If those earnings look strong, or we see more share buyback or stock-split announcements, we wouldn’t be surprised to see the SPX hold at support and potentially form an inverted head-and-shoulders pattern.
This Trading Opportunities issue is coming to you early due to the Good Friday holiday. Both markets and InvestorPlace will be closed Friday, Apr. 15. Enjoy the long weekend!
