Cold Showers and Hot Rallies — What You Need to Know

by Andrew Zatlin

The market is UGLY right now.

But the end is in sight. In fact, a relief rally is on its way.

Let me tell you why — and show you how to play it.

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

Cold Showers and Hot Rallies — What You Need to Know

This selloff isn’t over yet.

I believe there’s more pain to come — another drop of maybe 5% to 7%.

The good news? There’s an end in sight.

In fact, a “relief rally” is headed our way, and it’s going to be hot, hot, hot.

So let’s get ready for it…

The Big, Bad Fed

The reason for the selloff is simple:

Everyone is scared of the Big, Bad Fed…

We’re terrified the Fed will keep raising interest rates to fight inflation.

But as I’ll show you today — as I’ll prove to you — inflation is easing up already.

How do I know we’re on the right track?

My Bread and Butter

Simple — you just need to look at the data.

You see, a major component of inflation is wages. And when we’re talking about wages, we’re talking about hiring data. And that’s my area of expertise. (I’ve recently been ranked #1 for Jobs Forecasting by Bloomberg, ahead of Wall Street firms like J.P. Morgan and Bank of America.)

Well, last week, April hiring data was released. It said 428,000 jobs were added last month.

But that number is wrong. In fact, because of various “adjustments” that go into that number — the type of adjustments that only data hounds like me are aware of — it was very wrong.

The real number was closer to 200,000. That’s less than half the reported figure.

And if the Fed had been aware of this real number, it would have realized that inflation’s been busy taking cold showers!

In other words, job growth is slowing down. And when you have slower job growth, you get slower wage growth!

Let me prove it to you…

Here’s a chart that shows hourly earnings month-over-month:

Notice how the average peaked last fall, and how it’s been falling ever since? In fact, last month, it dropped sharply.

Why? Simple. Because when hiring slows down, wage growth slows down.

This is a clear sign that hiring is moderating…

That wage growth is moderating…

And that inflation is moderating.

A Shift in Autos

For more proof, just look at the auto industry.

14 million cars were produced last month. That’s a jump of more than 6% from March.

This greater supply of new cars means that demand for used cars is falling. And that prices for used cars are finally falling.

Check it out:

The thing is, used car prices play a significant role in the overall inflation numbers. So as the prices of used cars drops, inflation drops, too.

A Super-Hot Relief Rally

Bottom line: inflation is easing.

Sure, it will take a few weeks for the Fed to gather all this data and come to the right conclusion.

But I believe it’ll get there by late May.

And at that point, it’ll have some room to maneuver…

In other words, some room to refrain from further rate hikes.

That’s why, by June, I’m betting we’ll see a much less aggressive Fed.

And that, my friends, will be the catalyst for a super-hot “relief rally” in the markets.

If you’re looking for some ideas about how to play the next month, and how to play the forthcoming relief rally, check out my Pro content below.

In the meantime, Zatlin out. Talk to you soon.

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In it to win it,
Andrew Zatlin
Andrew Zatlin
Moneyball Economics