Inflation and the State of the Financial Markets
Dear Traders,
Good day. It’s CPI Day.
This morning, the market gapped up significantly following the release of the Consumer Price Index figures for the past month. The US inflation rate (YoY) for March 2022 came in at 8.5% vs. the 8.4% that had been estimated. February 2022’s inflation rate was 7.9% over February 2021. This news caused the market to move much higher in both premarket trading and in the Open session but it then sold off in the afternoon. Such market volatility is truly unbelievable. Traders at Peak Capital Trading as well as at Bear Bull Traders traded NVDA and the Tech Sector ETF TQQQ. We made some amazing trading profits today, thanks to the inflation report. You can watch the recap that Brian and I posted here. I personally booked over $40,000 for the day, an amount that many would consider to be more or less the equivalent of an annual salary for one person.
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The world markets are falling again in a concerted cross-asset selloff with echoes of the rate-spurred rout of October 2018. In particular, the relentless selloff in Treasuries threatens to mark the end of the four-decade bull run in bonds. I and others believe that today’s March CPI data will prove to be the high-water mark for US inflation, and price pressures will be apt to remain both elevated and persistent in the near future.
In terms of news headlines regarding the war in Eastern Europe, Ukraine expects Russia to widen its offensive in the east of the country this week. Russian troops will likely maintain a push to take the port city of Mariupol as well as other targets, Ukraine’s military staff indicated, while Mariupol’s mayor said more than 10,000 civilians had died in the city since the invasion. Nokia plans to exit Russia. European natural gas prices rose amid lower orders for Russian flows via Ukraine. And a Russian default is now seen as a question of when, not if, with all avenues for government-related entities to keep servicing their debts being shut down.
In other news, China, and especially Shanghai, is in a serious and chaotic lockdown again. One of my best friends is a Canadian living in Shanghai with his wife and son. We’ve been FaceTiming every night and he has told me that food is running low and people are extremely anxious. A city of 26 million people has only licensed 5,000 food delivery personnel. He also holds French citizenship and is thinking of trying to get his son and wife to the French Consulate in Shanghai for potential evacuation. It seems almost impossible to anticipate what the effect of the hard lockdowns in China will be on the inflation rates in North American and European countries. We know that ships are piling up outside of Chinese ports, in part due to a worker shortage. We’ll have to wait and see if once again some kind of outside shock – this time because of Chinese lockdowns – will jolt the system and continue to keep an upward pressure on inflation.
We are certainly living in some interesting times, and the market has been amazing and absolutely exciting to trade in.
To your success,
Andrew
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