CPI Numbers Are Out
The markets and the street are now looking at polar opposite inflation realities: While Wall Street is solely concerned with CPI figures and PCE stats (which the FED uses), the person on the street is looking at other real-world measures.
This is creating weird dynamics; gold is surging back now, since CPI numbers came in slightly above what was expected, with the majority of the hotness coming from used cars and trucks, two categories that everybody and their sister knows is transitory and in a super-bubble.
Here’s the best way to understand the situation: When surveying the average person, he continues to see inflation rising for years to come, but the markets now seem to believe that the FED might not even taper, since the situation is mostly due to supply chain disruptions, not real inflation of the currency.
Take a look at consumer surveys:
So, with CPI coming on right at consensus, both on the monthly and annual numbers, we believe that peak inflation-scare is now fully behind us, if Delta doesn’t cause governments to freak out (over nothing).
Basically, what the market now believes is that businesses have turned more resilient to the challenges posed by this past year’s crisis and that competitive enterprise will compress prices back to earth.
Is that good or bad?
Well, because it means the FED won’t have to be aggressive, it’s good for both gold and tech stocks (lower rates are good for these asset classes).
The dividend companies (often referred to as re-opening stocks) don’t have a clear advantage anymore and that means that we might see those selling off.
In the end, what we care about is that things are not getting out of hand and that’s good.
The United States doesn’t need the FED to be aggressive or chase inflation and tame it; we’d much rather see it gradually pulling back and letting the recovery continue, with fewer interventions. The government should follow suit and stay the hell out of the economy!
Let the markets decide how to incentivize workers to come back, train and recruit them, and how to grow from there.
Since January 1st 2021, the S&P 500 has delivered a 19.68% return. The NASDAQ 100 has done exactly the same, with the Dow Jones Industrial Average clocking a 16.95% return. These are great results, nearly double the historical annual yields these indices provide long-term investors with, which tells me an awful lot about what could be coming next!
93% Of Investors Generate Annual Returns, Which Barely Beat Inflation.
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While these are huge returns and the decision to remain seated and let the portfolio run has been the right one, the Watch Lists have fared even better!
- The Hershey Company (HSY), which dipped below its noted limit order on June 26th 2020, has appreciated by 42%, with a 3% dividend for the period and now sits at a new all-time high!
- Medtronic (MDT), which we were lucky to see dip to its noted limit order on that same date, has now appreciated by 44%, with a 3% dividend for the period and sits near its all-time high as well!
- Trane Technologies (TT), which somehow got sold off so hard that it hit the low-ball limit of $84/share on June 26th 2020, is now up over 130% and sits at an all-time high!
- S&P Intelligence Group (SPGI), which is nearly a monopoly and is just a fantastic business, only dipped below the limit order four months after the release of the Watch List; patience was rewarded, since it has appreciated by 44% in 2021 and sits at record highs!
- DocuSign (DOCU), which was featured in the May 13th 2021 tech-wreck Watch List, is up 69% since then!
This was less than three months ago!
- Dropbox (DBX), which was featured in the January 2021 Watch List, has beaten all indices by a mile, appreciating by 46%, year-to-date!
More big updates to come shortly!
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