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Where are the markets heading?
Since the COVID War began, governments and central banks have pumped unprecedented amounts of cheap money to artificially prop up locked down economies and failing equity markets. Last year, the Trends Journal was the first publication to forecast that equities and economies would come tumbling down when inflation moved sharply higher.
Over in the Eurozone, today’s new is inflation hit a two-year high, rising 2 percent in May. The market gamblers, hedge funds, and private equity groups are worried that not only will the Banksters cut back monetary methadone injections and their recently accelerated bond-buying… but as inflation rises, so, too, will interest rates, which are now in negative territory at -0.5 percent.
TREND FORECAST: As we have forecast, over and over again in the Trends Journal, the higher inflation goes, the higher interest will rise… and when interest rates rise and the cheap money flows dry up, equity markets and economies will crash, as will many currencies.
U.S. INFLATION SURGES. But, of course, the BS from Banksters, as we have detailed in the Trends Journal, is that the inflation spikes are only temporary, and they will keep interest rates low and keep injecting cheap money into the financial system.
As we have forecast, yes, inflation will, in some sectors, come down from its highs, but the rate will be far higher than before the politicians launched the COVID War. It was their draconian lockdowns that cut production and disrupted supply chains that are fully responsible for the price surges.
Again, our inflation warnings have been loud and clear, and as Gregory Mannarino writes in his new article this week, titled, “INFLATION GAME: HIDE AND SEEK,” “EVERY SINGLE forward projecting inflation indicator is flashing red.”
Want more proof? U.S. Core Personal Consumption Expenditure Index, the Consumer Price Index stripped of food and energy costs, jumped 3.1 percent in April. Year over year, this is the largest 12-month spike in almost 30 years, according to the U.S. Commerce Department.
The rise surprised the Wall Street money junkies, who had forecast, at the worst, a 2.9-percent bump… and the inflation rate ran far ahead of March’s 1.9-percent gain.
The month-to-month gains were 0.4 percent in March and 0.7 percent in April, which peg the yearly inflation rate well above the U.S. Federal Reserve’s 2-percent target… a number they made up in 2012.
Spending on services surged 1.1 percent for the month, while purchases of goods, especially nondurables such as cleaning products, fell back slightly.
The index’s gain was not driven by consumer demand as much as by rising prices, Wall Street Journal analyst Justin Lahart noted on 29 May.
By that measure, “real, or inflation-adjusted, spending declined,” he noted.
Last week, the Biden administration fanned fears of inflation as it laid out a $6-trillion budget for the coming federal fiscal year, betting it can spend lavishly on infrastructure and the social safety net without igniting runaway inflation.
Biden’s budget foresees U.S. debt rising to 117 percent of GDP over the next ten years, with inflation plodding at just above 2 percent.
The White House pegs U.S. economic growth at 5.2 percent this year, a more conservative number than the U.S. Federal Reserve or International Monetary Fund expects.
TREND FORECAST: The higher inflation rises, the more dramatic the market swings. Thus, there will be sharp market volatility. We maintain our forecast that when the Fed rate approaches 1.5 percent, equities and the economy will crash, and the “Greatest Depression” will sweep across the globe.
TREND FORECAST: While some analysts, such as Paul Ashworth, Capital Economics’ chief economist, told the Financial Times that “The combination of soaring prices and falling real consumption last month gives off a faint whiff of stagflation” – which combines price inflation and stagnant demand – we disagree.
We forecast “Dragflation.” As economic conditions deteriorate, consumer demand will deeply slump as prices rise and currencies decline. Thus, the cheaper the value of the currency the more it will cost to buy products.
The Market Front
Despite inflation fears, many of the global stocks hit record highs.
The S&P 500 and the Dow closed out 31 May on an up note, racking up gains for the entire month… and the S&P was just 0.8 percent down from its all-time high. The NASDAQ, however, closed down, ending its six-month winning streak.
Today, after moving up throughout the day, U.S. stocks finished mostly flat as worries increased that inflation would be rising higher. After being up some 100 points, the Dow closed up 40 points while the S&P and NASDAQ closed down 0.1 percent.
Oil: On the news that the OPEC + gang agreed to gradually ease production cuts and expectations for rising economic growth, Brent Crude jumped to a two-year high, closing at $70.53 a barrel. West Texas Intermediate was up 2.46 percent closing at 67.96 a barrel.
Thus, despite the BS from the Banksters, inflation keeps running higher. Again, the higher inflation rises, the higher interest rates will climb. And the higher interest rates rise the deeper the economy and equity markets will sink.
Gold/Silver: As Treasury yields moved higher, gold took a bit of a hit today after moving toward a five-month high, closing just below $1,900 per ounce. Silver moved up a bit closing at $28.08 an ounce.
We maintain our forecast for rising inflation and a declining dollar which. Thus, by year’s end, gold will be heading toward $2,100 per ounce and silver above $50 per ounce.
Bitcoin: As we go to press, Bitcoin fell some 3.31 percent today, trading just below $36,000 per coin. While many of the cryptocurrencies took a big hit during May over worries of increased government control, the big names recovered much of their losses.
We maintain our forecast that if there were no crypto market, gold would be above $3,000 per ounce and silver above $100 per ounce.
On the crypto front, minus real concerns of government intervention and/or competing central bank digital currencies, the market speculation will push Bitcoin prices higher.