The simplest outline for this week concerns inflation.
Stocks have erupted higher in the last month based on the belief that the economy is roaring once again. However, this is all about sentiment, not reality. The Fed’s own real-time GDP tracking tools has collapsed from predicting growth of 3.5% in early February to just 1.9% last week.
While “growth” isn’t coming anytime soon… INFLATION is.
Globally, inflation metrics are going through the roof. In the US, inflation is now well above the Fed’s target rate of 2%. If you were looking at this chart as if it were a stock, you’d say that was a seriously bullish breakout.
The story is the same in Europe as well, where inflation is staging a bullish breakout to the upside. Two years ago, the EU was in a deflationary nightmare. Today, inflation is roaring having risen 3.5% in the last 18 months.
Inflation has even appeared in Japan for the first time in years.
THIS, not growth, is the big story for 2017: after maintaining interest rates at ZERO if not negative for 7 years, and printing over $14 trillion, Central Banks have unleashed an inflationary tsunami.
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Chief Market Strategist
Phoenix Capital Research