According to the latest consumer price index (CPI) data, inflation ran hotter than expected in January. These fresh figures spooked the market, and stocks spent the day sliding in response. But we’re confident that this selloff is little more than a golden buying opportunity ahead of the incoming $7 trillion AI Endgame.
And in fact, we think that despite the market’s negative reaction, today’s CPI report was quite fundamentally strong.
The index showed that the headline inflation rate dropped from 3.4% in December to 3.1% in January. Food inflation dropped from 2.7% to 2.6%, while energy inflation fell to -4.6%. Furniture inflation dropped to -1.3%. Apparel inflation slid to 0.1%. And recreational services and core goods inflation also declined last month.
Across every major line item, inflation dropped in January. And importantly, pretty much all those inflation rates dropped to really low levels.
Plus, did you know that, excluding housing costs, inflation is running at just 1.5% right now?
That’s right. Excluding shelter, the U.S. inflation rate dropped from 1.9% in December to 1.5% in January. And that means it has been stabilizing below 2% for several months now.
Outside of housing, the inflation fight is over.
But of course, we can’t exclude housing in our overall assessment.
History Repeats
Rents and mortgage payments account for a huge portion of living expenses. And at 6%, shelter inflation is still problematic right now. That’s why the overall inflation rate is still up at 3.1%.
But the government uses actual rents and real-time rent proxies to calculate its shelter inflation, not asking rents. Since renters usually sign 12-month leases, asking rent prices tend to lead actual rent prices by about 12 months.
Therefore, the shelter inflation rate is a lagging indicator. Asking rents are the leading indicator here.
Indeed, Zillow’s Observed Rent Index – which uses asking rents to approximate shelter inflation – has a strong historical tendency to lead the official shelter rate by about 12 months.
And Zillow’s index has been collapsing for 24 months, while the official shelter inflation rate has been falling for just 12 months.
The historical relationship here suggests that for the next 12 months, the official shelter inflation rate will keep dropping all the way back to 3% or less (roughly where Zillow’s Observed Rent Index is these days).
Inflation: Still on Track for 2%
Let’s connect the dots here.
Excluding shelter, inflation is running at 1.5% and has been stabilizing below 2% for months now.
And shelter inflation is on track to fall from 6% to 3% or less over the next 12 months…
That’s why we’re confident that inflation is on track to fall to and even below 2% within the next few months.
Not to mention, according to today’s small business optimism survey, the net percentage of small businesses raising selling prices right now (22%) is the lowest since January 2022.
So, despite today’s negative reaction to a hotter-than-expected CPI report, the general trend in the U.S. economy remains steady disinflation.
That means today’s stock market selloff won’t last.
This drop is a buying opportunity…
Especially considering that we are on the cusp of what we’re calling the AI Endgame.
The Final Word
See; while we investors are worried about today’s CPI report, the world’s most powerful are working behind the scenes to construct an AI-dominated future – one that redefines how we live, work, travel, communicate, and more.
As we speak, OpenAI is sitting on a world-changing AI breakthrough that needs way more infrastructure than currently exists to be deployed on a global scale.
So, CEO Sam Altman is rushing to build that infrastructure. And to do it, he’s looking to the world’s biggest and most powerful governments, companies, and investors to pour $7 trillion into reshaping the global AI industry.
The implication, of course, is that once this $7 trillion of AI infrastructure is built, Altman and company will reveal their next-gen artificial superintelligence…
We’re calling this endeavor the AI Endgame. And its script is being written right now.
So, forget the CPI data. How you prepare for this new era could impact your financial future in a much more meaningful way.
That’s why I’m going live with an emergency broadcast tonight, Feb. 13 at 8 p.m. EST. I’ll tell you everything I know about this AI Endgame, why it’s happening now, and what you can do today to position yourself on the winning side of it.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
P.S. You can stay up to speed with Luke’s latest market analysis by reading our Daily Notes! Check out the latest issue on your Innovation Investor or Early Stage Investor subscriber site.
