2 Big Signs Indicating Stagflation Is Imminent
2023.03.23 03:41
The Fed raised rates by 25 bps. The was unanimous. The terminal rate projection is unchanged at 5.1%
FOMC modifies guidance:
“The committee anticipates that some additional policy firming may be appropriate.”
My first tweet this morning before the market opened:
“I feel pretty certain Powell goes 25. Announces they’re willing to keep raising at that rate as jobs are strong, the economy ok and banks aren’t in a credit crisis. However, as data dependent, they could change course accordingly. $SPY remains in a trading range. Until the next fracture appears”
“And then there’s $sugar looking like it’s about to continue the rally higher. Food prices will remain elevated. And the Fed remains stuck between the damage done but the root of inflation far from fixed.”
My tweeted response after the FOMC?
“5% yields create more stress to the labor market. Does nothing for riding food prices and global inflation. Silver is outperforming gold. Sounds like Stagflation”
Here are two signs that indicate stagflation could be taking hold:
1. Silver is Beginning to Outperform gold
The daily chart of silver shows the price rising further away from the 50-daily moving average in blue.
The Leadership indicator shows that is beginning to outperform . That in and of itself is highly inflationary.
The Initial response in the indices was to buy as investors only hear “pivot.”
Powell: Intermeeting data on jobs and inflation came in stronger than expected. We considered pause, but the hike was supported by strong consensus.
Do you hear pivot? I hear considered quite different.
This is why it is essential to watch how silver performs relative to gold and how bonds perform relative to the .
2. Long Bonds Are Outperforming the S&P 500
The from March 12th covers this potential in detail.
Long bonds (NASDAQ:) outperforming S&P 500 is typically recessionary.
So, if you add up rising gold, silver, , , , steel maybe prices, along with long bonds showing yields might have topped and then add that the bonds are doing better than the market (SPY)—that equals stagflation.
But the real issue is we have not seen the full impact of the Fed and CBs losing control. And the is weak.
US Dollar Index Futures Daily Chart
A perfect storm?
ETF Summary
- S&P 500 (SPY) 400 pierced for a minute, now back to resistance 390 pivotal
- Russell 2000 (IWM) 170-180 range now
- Dow (DIA) Could not hold the move over 324 the 200-DMA
- Nasdaq (QQQ) 328 is the 23-month MA resistances e and is now a bit overbought on the indicators-
- Regional banks (KRE) 44 support 50 resistance
- Semiconductors (SMH) will watch for a key reversal to the mean w/ 250 support
- .Transportation (IYT) Holding the 200-WMA 219 but has to clear the 200-DMA at 224
- Biotechnology (IBB) 127.50 resistance
- Retail (XRT) 60 ample support and 64 considerable resistance
