2023-06-21 15:17:00
In a surprising development, the markets took a sharp turn, anticipating an easy approach as a solution to their persistent inflation fears.
The markets just assumed a turn towards easing, believing that the problem had been overcome. The chart below shows expected inflation in one year.
The expected inflation rate for one year.
Yes, you see it right.
The market expects inflation to drop to around 1.31% in one year.
Just over 1% in one year… truly ?!
Here is the latest CPI reading (on a yearly basis):
CPI has fallen from above 6% to just over 5%, after all those interest rate hikes…
Not for less than 2%, not less than 3%, not less than 4%, not even less than 5%.
If this downward trend continues, it will take Years Until the CPI moves below 2%. Let’s keep in mind that the Fed kept raising interest rates in order to kickstart this trend…
Now, at the same time, the market is expecting interest rates not to go up too much and for inflation to somehow come down to 1.31% in one year.
It doesn’t take a PhD in economics to see from these two schemes that this is not only impossible, but an absurd expectation.
To show you the extent of the current delusion, I have identified a somewhat similar situation from the past.
The last time the market expected inflation to be around 3%, it was in October 2008.
But that was when inflation was only 2.5%! It is reasonable to expect a decline of about 1% in the CPI within a year.
but now? The market expects the Fed to push inflation down several times more and… without the need to raise interest rates.
The war against inflation is far from over, and market expectations of easing and a general rally are far from reality.
And by the way, since we’re comparing what happened in October 2008, do you remember what happened to the price after that?
Let’s remember:
It was when gold rebounded and the bundling ended when the bulk of the slide began.
This is also the time when stocks fell, and the American rose.
So why have stocks gone so high?
Because the investment crowd has entered the market, which is the “return to normal” stage of the bear market in stocks, most investors (mainly the investment public) assume that this is the return of the bull market.
The warning call won’t be pleasant for many – but you’ve been warned
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#Gold #rise #dreaming