Inflation Storm Coming

S&P 500 going nowhere, repelling selling pressure concentrated to value as tech mostly defended the daily ground – that‘s a fair summary of the stock market going into today‘s CPI. VIX rising and the put/call ratio as complacent as can be, are signs of quite some moves ahead.

I won‘t go into the transitory vs. getting permanently elevated inflation arguments too much today – see them covered in detail namely on Jun 08Jun 02May 27May 17, and May 12.

Over the coming month – most likely starting with the CPI readings for September – the low yearly base effect and reopening rush would be sufficiently history. But the strained and disrupted supply chains beyond microchips, high-cost base as evidenced by the CRB index lumping many commodities together, difficulties hiring, and not exactly labor market-friendly policies a la minimum wages, would deliver a one-two punch to the transitory concepts – because transitory as in temporary, brings up to my mind J. M. Keynes „In the long run, we‘re all dead“ quote.

As I‘ve stated on Twitter, commodities with silver, then gold are more in danger than stocks for today – but even these would eventually recover. The Fed isn‘t in a position to do more than token steps to satisfy public consumption, so keep in mind the big picture regarding taper, rate raising, or even the (market declared so historically) balance sheet contraction success on a lasting basis (we‘re not in the post-WWII era when the U.S. could grow its way out of debt as in the „City on the Hill“ inspirational speech decades later.

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