WealthPress Senior Strategist Roger Scott and I have been talking for a while now about how August’s summer trading volume was low, lackluster and lacking a concrete foundation to base trades off of. We also discussed how stocks will be affected by rising inflation in 2021…
And how the Federal Reserve has been doing a fantastic job of ignoring every warning sign the stock market has given it of this building problem.
So it was no surprise when Fed Chair Jerome Powell said during his Jackson Hole speech on Friday the economy has come to the point where it doesn’t need much more support… Therefore, the central bank will likely start to withdraw some of its easy-money policies before 2022 in the form of tapering its bond-buying.
However, Powell of course doesn’t see an interest rate hike happening anytime soon — it must be because he’s breaking his neck to turn a blind eye to the obvious inflation in the stock market right now.
Here’s the thing about the Fed’s plan to remain inactive… The market is going to reach a point where it is going to be forced to taper because inflation is going to explode alongside volatility.
And by the time that happens, the Fed will have nothing under control…
Heck, I don’t know if anyone else noticed this but during the last minutes of Powell’s speech, he said that looking back, he thinks the Fed might have made a mistake by acting too early in 2020.
Which is ironic because it’s making another mistake right now in reacting too slowly to rampant inflation.
And when the hand gets forced to act, it’s going to be an incredibly messy time in the markets…
Sectors and Stocks Most Affected by Rising Inflation in 2021
When inflation explodes in the market, it’s the everyday consumers who are going to be hit the worst. They’ll be shocked at the price of a full tank of gas, no matter how economically efficient they’re car is.
And I have a hunch that investors are not psychologically prepared for what’s coming next in this inflation cycle.
Everyone keeps talking about this historic pressure on the economy — which is true. But what’s happening now is strictly monetary debasement.
The Fed is quite literally making money worthless. Right now the money is going toward what it can rather than just sitting in the bank.
And the market has been reacting negatively for awhile now — just look at the price of Aluminum (ALI: CMX).
Aluminum is one of the biggest components in electric vehicles, technology and semiconductor chips. This is already a huge problem, and when inflation erupts it’s not just gas prices that’ll shoot up.
If people thought demand and lack of supply for EVs and chips were maxxed out now, they’re in for a nasty surprise in the coming months.
And while the negative impact on the market of commodities reaching new highs will be a massive shock to investors, the worst is yet to come for the stocks affected by rising inflation in 2021…
Make sure to watch the video below to learn more about stocks affected by rising inflation. Roger and I also discuss how else the Fed is actively making the economy worse, major upcoming disruptions that could happen during the holidays and China.
As always, send any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.
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