Is Inflation Coming Down / The Market Rallies Back

Dear Traders,

My apologies for missing trading yesterday. Carlos and I went to the Monolink concert on Wednesday in Vancouver and the night got late for both of us. I did not trade on Thursday, but today was an amazing day for Opening Range Breakouts on technology sector stocks such as TQQQ and AMD. You can watch the recap that Brian and I posted on YouTube here.

Monday is Memorial Day and the markets are closed as we reflect on those who gave the ultimate sacrifice. We will see you next Tuesday for a full round of webinars.

Is Inflation Coming Down? The Market Rallies Back.

JPMorgan Chase economists said in a Wednesday note that global inflation will peak at an annual rate of 8.6% this quarter. They pencil in a “substantial step down” to a 3.25% average pace in the second half of 2022. The inflation supertanker apparently is finally turning. Supply and demand of course determines inflation in an economic sense, but at the end of the day, companies are the ones that set prices, and evidence is mounting that their ability to keep boosting prices is waning. Target and Walmart were among retailers recently reporting shrinking margins, with Target’s CEO citing a rapid slowdown in core merchandise sales trends starting in March, resulting in the need to reduce prices for budget-conscious shoppers.

These forecasts and indications give some credibility to the scenario that the Fed will be pausing, or at least slowing, their course of monetary tightening. “Many” Fed officials this month thought they’d be well positioned, after accelerating rate hikes, to “assess the effects” of their actions and see the extent to which policy adjustments were needed. This week, Atlanta Fed President Raphael Bostic explicitly opened the door to a pause in the autumn.

In a Wednesday report, the nonpartisan Congressional Budget Office (CBO) estimated that the US GDP will grow 3.1% in 2022. “In CBO’s projections, the current economic expansion continues, and economic output grows rapidly over the next year,” the CBO said in its report. On inflation, they reported that it will stay well above the Fed’s 2% target throughout 2022 and 2023, but also stated it’s likely that the pace of price increases won’t rise above current levels.

Given this positive outlook in the news, the market seems to have found a bottom and has rallied for the second straight day as investors gain more confidence in the financial markets.

Maybe the good days of all-time highs are coming back?

Happy Memorial Day long weekend!

To your success,
Andrew

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