Equity markets are on a relentless uptrend, seemingly impervious to bad news. In the battle between inflation and deflation, inflation is currently holding the upper hand, despite all efforts.
🌎 Examples like Argentina and Turkey are experiencing staggering year-over-year inflation rates of 70% to 125%. Globally, our debt-to-GDP ratio has soared above 350%. The question lingers: Will a 5% FED funds rate suffice for the world’s reserve currency?
🪙 In the short term, both Peter Schiff and Ray Dalio concur that government debt instruments like bonds and treasuries might not be the wisest choice. They advocate holding cash, especially in the intermediate term. Cash reigns supreme during crisis investing, offering optionality.
💰 We’re witnessing the largest destruction of money supply since the late 1930s Great Depression. With a 5% annual rate that fails to keep up with inflation, coupled with an inverted yield curve signaling recession and soaring oil prices, challenges loom.
🌐 Add in the war on cash, the looming threat of central bank digital currencies (CBDCs), and the uncertain future in Congress, and we’re navigating unprecedented territory. Stagflation, deflation, and inflationary pressures are converging.
💳 The American consumer is feeling the pinch, relying on high-interest rate credit cards. With 11 consecutive rate hikes and more uncertainty, we wonder if we’re halfway or all the way there.
🔒 Raising interest rates might not be the silver bullet, as it could risk crashing the economy. We’re in a delicate balancing act, where another shock event or lockdown might be the only way to curb inflation.
🚗 The largest United Auto Workers strike in recent decades and the looming unemployment spike hint at a potential Black Swan event on the horizon – even if it remains invisible for now.
📊 The Federal Reserve faces the challenge of controlling the velocity of M2 money stock as they did during COVID, making hiding inflation more difficult.
Stay vigilant, adapt, and be prepared for the twists and turns ahead. The future remains uncertain, but as investors, we thrive on navigating the unknown. 💪 #EquityMarkets #InflationVsDeflation #InvestingInsights
