Hey There Income Hunter,

 

We are witnessing an inflationary force that has reached historic proportions.

 

And forget about measuring today’s inflation against 1970s levels. 

 

Because it’s not even close.

 

Here’s why …

 

The Federal Reserve’s consumer price inflation (CPI) calculation was changed to cut the measure in half in the early 80s – just so the Fed could print more money while still meeting its CPI target.

 

Here is today’s number alongside the pre-1980s calculation to show the relative difference:

 

So, today’s actual inflation (15%) is double the Fed’s current CPI number (7.5%)!

 

And inflation is present everywhere.

 

It began as monetary inflation in the 1970s …

 

That turned into CPI and PPI inflation in the 1980s …

 

After the calculation was altered, it transitioned to commercial real estate inflation in the 90s, before moving to IPO inflation in 2000 ..

 

Before it finally found its way to housing inflation in 2008. 

 

Today, we’ll take a look at the inflationary sector that will burst in 2022, what we can expect the Fed to do …

 

And how you can profit.

 

How Inflationary Cycles End

 

We know one thing for sure … Inflationary cycles end when policymakers tighten monetary policy. 

 

The Fed’s main mandate is to achieve stable prices, which means holding inflation at bay.

 

Our central bank failed miserably at this in 2021 and now must find a way to bring it down this year.

 

There are a couple of real hurdles here for the Fed …

 

No. 1 is the US has never experienced an “everything” inflation cycle, so the critical question is when policymakers raise rates, which inflation cycle ends first – and falls the hardest. 

 

I think in 2022 the stock market will bear the brunt.

 

The indexes continue to trade at very high valuations, and a historic rotation out of mega-cap growth into value is still in the early innings. 

 

I have maintained the view that rallies in growth equities and the US indexes should be sold into strength. 

 

And financial conditions have not yet tightened enough to change the Fed’s focus on maintaining its tightening stance to fight inflation.

 

The chart below shows the turnaround of financial conditions. Once they get above average, you can anticipate the Fed to shift back to an easing bias:

 

 

The inputs to the above chart are:

 

• • 30-year jumbo/conforming fixed rate mortgages
  • 3-5 year AAA corporate bond option adjusted spreads
  • High yield corporate bond spreads
  • 3-month bank/US Treasury Spread
  • 3-month Eurodollar/US Treasury Spread

 

The bullets above are a comprehensive list of signposts to watch for changes in financial conditions. 

 

They are starting to trend towards tighter conditions but are still in easing territory as we head towards the first Fed rate hike on March 16.

 

My Power Income Trader program accurately anticipated the 2021 Stage 2 bullish inflationary period and crushed it with an average 60%-plus gain for the year.

 

Coming into 2022, my system turned bearish on US growth and has been selling the stock indexes on rallies. We are now in the most bearish State 4 period of inflation, which will last at least another couple of months. 

 

Last week, we closed our long SPDR Utilities Sector ETF (XLU) /short SPDR Financials Sector ETF (XLF) trades.

 

Power Income Trader shows Financials to be the worst performing sector during a Stage 4 inflationary period … and the XLF bear legs gained 33% and 123% while the XLU bull legs were -13% and +33%.

 

Here is the charting pattern on the ratio:

 

 

Now we will be looking to reset the trade at a higher ratio.

 

Financials should continue to be one of the poorest performing sectors as the Fed begins tightening. 

 

Bring It Home

 

Today is the final day of the month and that may bring more counter-trend rallies for the broad indexes.

 

I see some great opportunities to benefit from the Fed tightening in the weeks ahead. The very best way to aggressively trade this inflation cycle is to join Power Income Trader. Do that by calling our Customer Care Team at 800-672-2098 today between 9 a.m.-5 p.m.

 

Yes, the long-term US equity bull market is over, but you can make even more money during bear market phases

 

And this one will be historic.

 

Live and Trade With Passion My Friend,
Griff