Stocks are soaring today after June’s consumer price index (CPI) report showed that inflation crashed to just 3% last month.
The big rally is nice. But we think this party is actually just getting started.
We believe today’s inflation report confirms that we’re in a new bull market. And certain stocks will absolutely surge higher over the next few months and years.
That thesis all boils down to one key fact, as confirmed by today’s CPI data: Inflation is dead.
In June of last year, inflation was running above 9%. So, in other words, inflation has dropped by two-thirds in 12 months. And moreover, during those 12 months, inflation dropped every single month, marking the longest disinflation streak of all time.
Sure, at 3% inflation, we’re still above the Fed’s 2% “target.” But that number is arbitrary. From a data perspective, inflation has averaged 4% over the past 50 years. That means that we’ve actually reached an economy with below-average inflation.
The inflation fight is over. The U.S. economy won.
What happens next?
Well, more disinflation.
Get this: If it weren’t for housing, inflation would be next to nothing right now. CPI excluding shelter rose just 0.7% in June. Just 0.7%!
And guess where housing inflation is going next?
Down.
Shelter CPI Is About to Collapse
Shelter CPI is a notoriously laggy metric. Due to the way it is calculated, it usually takes a long time for real-time home pricing trends to be reflected in the numbers.
Specifically, shelter CPI tends to lag Zillow’s rent price index – a real-time indicator of rent inflation across the U.S. – by about 12 months.
That index has been collapsing for 15 straight months. And unsurprisingly, shelter CPI just started to turn lower three months ago.
If this 12-month-lag relationship persists – and there is no reason it shouldn’t – then official shelter CPI numbers will collapse over the next year.
Shelter CPI is the only thing keeping inflation above 2% right now. Without it, CPI is running at just 0.7%.
Therefore, as shelter CPI normalizes from 8% to 3% over the next 12 months, overall CPI will keep plunging. Inflation will likely fall to 2% within a few months and should stay in the 1% to 2% range deep into 2024.
Alas, I repeat: The inflation fight is over.
By extension, a new bull market has officially begun.
The Final Word
In new bull markets, most stocks rally. Rising tides tend to lift all boats.
But in those rising tides, some boats are lifted faster than others. Likewise, in every bull market, some stocks surge a lot higher than others.
Now, we’re not talking about stocks that could go up 20% or 30% in a year or even a month.
We’re talking about stocks that could go up 20%-plus in a week and 100%-plus in a month – the market’s fastest-moving stocks. We’re talking about “primed stocks.”
Never heard of primed stocks?
They fly under most investors’ radar. But they’re constantly producing the market’s biggest returns.
And we’ve developed an AI-driven model to trade them with stunning accuracy and precision.
Believe me when I say this is the perfect investment tool to potentially “strike it rich” in this new emerging bull market.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
