Defeating Inflation – by Justin Vaughn

(Justin Vaughn, Editor, Options Trading Report)

Stocks opened flat on Monday as investors and traders worried about market influencers; the anticipated rate hike next week, lingering stubborn inflation, and a spate of earnings reports to start the second half. Also due out this week, the U.S. Consumer and Producer inflation report that is predicted to show retail prices dropping a bit. That information is not deemed ‘strong enough’ to sway Mr. Powell and company, as it is very certain that this month and possibly next will see at least a 0.25% rate hike. Interestingly, two Federal Reserve presidents were on the ‘same-page,’ as Cleveland President Loretta Mester and San Francisco President Mary C. Daly were both concerned that the economy was in need of ‘more hikes,’ to halt “stubborn inflation.” As Monday’s close neared, the market ‘caught fire’ with the Dow Jones Industrial Average closing up over 200 points

China continues to struggle with monetary economic woes, with several stimuli that have not been successful. The yuan [the people’s currency] has slipped to a six month low against the U.S. dollar. Worries over the erratic pandemic recovery have further ‘hit the yuan,’ Severe yield differences have distanced the dollar versus the yuan, with the yuan off more than 5% against the dollar since the first of the year. Currently the yuan is one of the worst performing Eastern currencies. The second largest economy in the world, China is now fighting to maintain its premier producer status. Hong Kong’s financial demise, brought on ‘totally’ by Chinese leaders, [terminating the lease agreement with U.K.] has doomed a once leading eastern financial center, taking with it a massive amount of once prime real estate worth billions …a two pronged disaster with no chance of recovery.

Anxious investors drove the Dow Jones Industrial Average up 315 points with the S&P 500 and Nasdaq Composite rising 0.7% and 0.55%, respectively on Tuesday. Also, the NFIB survey results added more optimism, as it was up for the seventh straight month. The U.S. Consumer Price Index boosted Wednesday’s market, with a 4.8% increase in ‘year over year,’ while consumer prices rose only 3%, the lowest increase in nearly 2 years. This report [CPI] is a strong influencer for the Fed in determining rate hikes and their size there-of. Oil futures have risen 7% this month, with Brent Crude futures at $81.65 a barrel, while today’s crude is $77.06, and hovering. The yield on the 10-year Treasury Thursday, was 3.767%, as the rate has fallen slightly all week, reacting to ongoing and changing economic data. Thursday’s market was up-beat feeding off good news released the past couple of days. New claims for unemployment benefits fell significantly this past week, while wages and benefits were nicely up in all work sectors.

Uranium is shining… again rising nearly 18% year over year, a stark contrast to crude oil and natural gas, down significantly at 15% and 33% respectively, year over year. Presently uranium is near $56.00 a pound, up from the $40.00’s just 12 to eighteen months ago. Some analysts see a realistic price of $75.00 a pound in the near term of six months to eighteen months, while others predict in the middle $60.00’s. Russian uranium is not yet banned, as the commodity is being ‘footballed’ while countries around the world [exclusive of China and India] aggressively scour for suppliers. Ukraine and Bulgaria are big-time suppliers, with Ukraine on shaky ground with Putin’s War.

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Nicholas Jasinski, Writer of, ‘Looking Past Recession, for Barron’s “The yield on the two-year Treasury note is more than a percentage point higher than on the 10-year note, the largest gap since Silicon Valley Bank failed in March. An inversion this big hasn’t happened since the high inflation, rising rates, and recessions of the 1970’s and ‘80s.”

Anders S. Persson, chief investment officer for fixed income at Nuveen, WSJ “In the second half, I think we’re concerned that there’s going to be more scrutiny from investors around what the recession probabilities look like.” His team believes that bonds are now offering a better trade-off between risk and reward than stocks.

Randall W. Forsyth, Lead Writer “UP & DOWN WALL STREET” for Barron’s “The history of 1987 suggests that stretched valuations and rising interest rates make for an unpleasant recipe for equity bulls–maybe almost as unfavorable as the prospects for the Mets.”

Chris Brightman, CEO of Research Affiliates,”, Barron’s “We are at an extreme [in growth-stock valuation] that has only been observed a couple of times in history, notably in the aftermath of the 2020 pandemic crash, when everybody treated tech companies as the safe asset, and late 1999,” Mr. Brightman noted. Whose investment strategies are used in managing $120 billion in assets