Tags: fed | inflation | de ice | economy

Has Fed Finally De-Iced Inflation From 40-Year Lull?

Has Fed Finally De-Iced Inflation From 40-Year Lull?

By Thursday, 12 December 2019 12:31 PM Current | Bio | Archive

Before takeoff, when the thermometer shows sub-freezing temperatures, the airlines send out de-icing equipment.

The fluid is a chemical mixture that is heated and then sprayed to remove ice and snow on an aircraft.

However, it has a limited ability to prevent more ice from forming.

I love this analogy for current market conditions and particularly for Federal Reserve Chairman Jerome Powell’s comments on Dec. 11 about the future of rates and inflation.

We already know there is a disconnect between the Fed’s metrics for inflation and reality.

In fact, the Fed speaks mainly to investors, as most folks-statistically 61% of folks polled-do not think the stock market has any impact on their financial well-being.

Even more interesting is that 40% of those polled did not even know the market has gone to new highs.

Disconnect? You betcha.

My takeaway is that first, I wish more folks were aware of the market and how to make money in it.

Secondly, Powell said, “In order to move rates up, I would want to see… a significant move up in inflation that’s also persistent.”

With inflation already a factor for those who buy things like food, healthcare, clothes, etc., Powell’s comments contradict the notion that most (61%) think the market does not impact their wealth.

Even if the DJIA does not, inflation and the falling dollar definitely will.

Yet, we are traders and want to make money in any market condition.

Furthermore, MarketGauge educates both the novice and experienced investors. I particularly hope to teach those who feel disconnected from Wall Street.

If the Fed has de-iced inflation from its 40-year lull, what do we do for 2020?

Here are a few strategies to look for as we start the new year: 

The silver to gold ratio is one. Although we had one humongous move in silver in July 2019, since then it has sat dormant.

One more push higher in silver, and I can officially call a bottom. We just need a little more patience.

The Economic Modern Family is another. The “inside” factors-Retail XRT, Small Caps IYT and Transportation IYT need to partipate. Presently, none are close to their all-time highs.

As Semiconductors, the S&P 500, NASDAQ 100 and the Dow soar to new all-time highs, the “inside” measures have also risen in price but not by enough.

With jobs claims possibly rising and producer prices flat, we must also prepare for potential stagflation in 2020.

Watching the metals and the dollar make sense.

Finally, I would watch sugar futures as a well-kept secretive way to see how inflation may pick up and for how long.

Presently, sugar futures look as if they based out.

Trading at its highest levels since July 2019, sugar has the potential to blast off from here.

In that case, consumers will surely feel the inflation pinch as sugar is the cheap “high” most reach for, especially during holidays and when things are tough.

So yes, the Fed is trying to de-ice with its comments about the moderate growth in the economy and the desire to see higher inflation.

But, like the airlines, the Fed has limited ability to prevent further ice or “inflation” from forming.

Michele ‘Mish’ Schneider serves as Director of Trading Education at MarketGauge.com. For 20 years, MarketGauge.com has provided financial information and education to thousands. MarketWatch named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish won the Top Stock Pick of the year for RealVision. Follow her on Twitter at Michele Schneider @marketminute.

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The Fed has limited ability to prevent further ice or “inflation” from forming.
fed, inflation, de ice, economy
Thursday, 12 December 2019 12:31 PM
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