Wait a Minute – Stuff Is Getting Cheaper?!?

by Andrew Zatlin August 15, 2023 2:30 pm ET

Your eyes aren't deceiving you.

Prices are starting to fall...

And soon, the average consumer will have more money in their pockets.

What will they spend it on? The answer reveals our next money-making opportunity.

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

Wait a Minute – Stuff Is Getting Cheaper?!?

I always dreaded back-to-school shopping. The crowds, the chaos, and the laundry list of required items – everything from pencil cases to three-ringed binders.

Thankfully, those days are behind me. But those about to make their annual pilgrimage to the store may be in for a pleasant surprise: lower prices.

As I'll share with you, we're seeing a significant drop in the cost of key items, including school supplies. But trust me, you don't have to be a parent to reap the rewards of these price cuts. In fact, they can lead anyone to potential profits...

The Tide is Turning

Seeing the cost of anything fall these days warrants a double take. That's because we've dealt with abnormal inflation for more than a year.

You probably have your own personal barometer for how crazy inflation has gotten. For me, it's the cost of outdoor seat cushions.

Recently, hardware chain Lowe's (LOW) was charging upwards of $50 for a single seat cushion, a product that probably costs a dollar to make. The other day, though, I noticed the price had fallen to around $30.

Prices are coming down for things like seat cushions and school supplies. And lest you think I'm cherry-picking here, take a look at the broader data...

The Data Supports Our Thesis

Overall, spending has gone up by 3%. And inflation has gone up by 5%.

What's that mean? If you net it out, spending is actually down 2%. And it's not because people's dollars aren't going as far as they used to...

It's because they aren't having to shell out as many dollars to buy the things they need – in other words, product prices are dropping. Take a look:

In the back-to-school sector, things like shoes, textbooks, calculators, and even computers are cheaper than before.

Retail spending is essential to assessing the overall economy. It's a data category I take pride in analyzing, and forecasting better than anyone else out there.

Last month, I forecasted a 0.8% change in retail spending. Meanwhile, the Wall Street consensus projected a 0.4% change. The actual change was 0.7%, placing me tops among all economic forecasters on Bloomberg. Take a look:

But enough about me. The question is: Are falling prices merely a red flag that the U.S. economy is in trouble?

A Win-Win Situation

Not at all. In fact, this is a win-win situation. Let me explain...

Cheaper prices is obviously good news for consumers. The thing is, this isn't a situation where consumers are saving money at the expense of companies. In fact, companies are benefiting from lower retail prices, too. They're spending less to produce and distribute these products, enabling them to keep their margins attractive.

But that's not to say there isn't a "loser" here...

A Not-so-Grand Re-Opening

The loser is China. You see, the reason we're experiencing deflation relates to China's efforts to come back online after COVID.

Right now, the country has too much factory capacity, so it's forced to dump its products into the market at lower prices.

Furthermore, the supply chain bottlenecks that raised prices so dramatically are virtually solved. And as you can see by the Baltic Dry Index below, shipping rates have collapsed:

Bottom line: Prices are falling. And that means U.S. consumers will soon have more money in their pockets. What will they do with it?

That's where investors like us can start to get excited...

Flush with Cash

You see, most consumers will take those extra dollars and spend, spend, spend.

Where they'll spend it is key to our investment opportunities. But keep in mind: No matter where they spend, companies will soon start to benefit. And a few months from now, they'll likely report higher earnings. And as always, higher earnings lead to higher stock prices. So get ready for a market upswing this fall.

In the meantime, let's consider what sectors consumers will and won't flock to.

For starters, they won't go out and splurge on big-ticket items like electronics and appliances. Many consumers scooped up these products a few years ago. And those in the market for these products will see prices falling and probably sit tight, hoping for even bigger price reductions.

Simply put, stay away from companies that sell these items.

(By the way, the decline in purchases of electronics and appliances is a major consumer trend – and a potential investment goldmine. In fact, readers of my Crash Alert service recently learned a way to potentially triple their money by targeting this trend. You can join them, too – just click here.)

What I believe consumers will spend on are the little things. Maybe they purchase more of the essentials, or maybe they treat themselves to something extra.

This is where I see the bulk of consumer spending flocking to. And one company in particular is positioned to capture the lion's share of this extra spending.

Curious which company I'm talking about? I've saved the answer for my "Pro" subscribers, so don't miss your chance to take advantage of this opportunity.

We're in it to win it. Zatlin out.