A twist to Donna Summers’ sizzling 1979 hit, we investors are always lookin’ for the next hot stuff to trade.
Like a house draped in skeletal heat, finding picks in all the familiar places, might just put your P&L up in smoke. This market appears about to shift. I have read several stories since I began talking about the dollar, commodities and the historically low ratio between them and equities.
These articles support my theory that the time is getting closer for a major shift.
One particular story of interest, hypothesizes that the Trump administration, like others before it, will be behooved to devalue the dollar.
“If the President is unable to satisfactorily adjust the trade terms with our partners, he could resort to a weak U.S. dollar policy.” Michael Lewbowitz for SeeItMarket.
Based on what I am seeing concerning retaliatory measures by our allies, it seems plausible. Furthermore, the devaluation of the Chinese Yuan serves as further proof the lengths countries will go to for tariff self-preservation.
Also out on Friday, May core PCE inflation numbers are up 2.0% year-to-year. Income is up nominally at .4% and the savings rate is up from 3 to 3.2%. Core inflation at 2% is what the Federal Reserve’s target is. Then, speaking of a house in flames, the predictions for the GDP numbers (Gross Domestic Product), indicate an economy that grew at 2% versus the earlier predictions of 2.3%.
Weighed down by the weakest consumer spending in nearly 5 years- think Granny Retail Brick and Mortar XRT- this quarter versus the 4th quarter results (2.9%) is a first step in the recessionary direction.
Adding it all up, reasons to devalue the dollar, inflation at the Fed’s target and an economy projected to slow – what do we got?
We got some hot stuff baby.
And we are moving closer to stagflation. If reading this makes you feel like your money is swathed in skeletons, never fear. There are always opportunities in every market condition.
