How to Profit from the Tailspin

by Andrew Zatlin

Don’t put away your First-Aid Kit…

Bleeding from the stock market isn’t over quite yet!

But as I’ll explain today, the end is in sight…

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

How to Profit from the Tailspin

The new inflation numbers came out earlier this week.

As you can see below, April was pretty mellow. It was the second lowest number in a year.

But still, the stock market crashed another 4%. Why?

Because investors were expecting inflation to be even lower. And the sooner inflation slows down, the sooner the Fed can stop raising interest rates.

The thing is, inflation is moderating — and it’s moderating quickly…

Three Inputs Drive Inflation

There are three main inputs currently driving up inflation:

  1. Gas.
  2. Cars.
  3. Transportation.

Let’s start with gas…

Prices are up 80% year-over-year! But the price of oil has held around $100 for a few months now. It’s not going up much from here. If anything, it’ll go down.

The second input driving up inflation is used cars.

But used car prices have peaked. As you can see below, over the past three months, prices have been mellowing:

And they’ll continue to fall as more and more new cars become available. So this problem is going away.

Then there’s transportation, which includes airline tickets.

Contrary to what you might think, prices aren’t up for tickets because the airlines are passing along increased fuel costs.

The airlines are raising prices because they can!

Basically, we all want to fly and travel, and we’re willing to pay through the nose to do so.

The Fed’s Decision

Those are the three inputs responsible for our recent inflation headaches. But as you just learned, inflation will soon level off.

So, what happens then?

In the short-term, I expect inflation to moderate towards 6%. Then it could fall to about 4% over the summer. But even at 4%, the Fed has a decision to make:

Can it live with 4% inflation? Or is it determined to get it down to its target of 2%?

If it’s adamant on hitting 2%, it will have to raise rates again — which risks blowing a major hole in the side of the “U.S.S. Stock Market.”

Profit from the Tailspin

Bottom line: inflation is easing. But investors’ lack of patience and fears about the Fed are keeping the market in a tailspin.

The Fed has a few more weeks of data to look at before the next rate hike meeting.

That’s why — even though I believe things will calm down soon — you should expect more short-term pain in the market.

If you’re a “Pro” subscriber, I’ve got a way to ease your suffering!

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

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