The Stock Market Is About To Explode

US Inflation Data

In this video, Ashley discusses the latest inflation data for the United States. She explains how all key indicators are falling at the same time and how this is excellent news for the US economy.

Food Inflation

• Food inflation has fallen to 7.7% for the second month in a row.

• This is very good news because only in January food inflation was stubbornly sitting at 10.1 percent.

• Food at home fell 0.2 percent month a month a second fall in a row.

• The annual rate is now sitting at just 7.1 year on year.

Energy Prices

• Energy overall went up 0.6 percent month a month and is only down 5.1 percent year on year.

• Gas at the pump according to inflation data is only 12 percent lower than 12 months ago.

• Electricity is up eight point four percent year on year despite everything happening with commodity prices.

The Stock Market

• The stock market bounced on the news of falling inflation rates but Ashley believes that it's not seeing quite how good this data is.

• The energy sector was once the market's best performer highlighted by a 50 jump in value last year but now it's down five percent so far even though the overall index has climbed eight percent.

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Key Takeaways

• All key indicators are falling simultaneously, which is excellent news for the US economy.

• Food inflation has fallen substantially, which will help those on low wages and underpin many jobs in manufacturing and other sectors.

• Energy companies are posting record profits while energy prices remain high, and the government is not doing enough to protect consumers.

• The stock market bounced on the news of falling inflation rates, but Ashley believes that it's not seeing quite how good this data is.

CPI and Inflation Trends

The speaker discusses the trends in inflation, specifically focusing on the Consumer Price Index (CPI), and how different factors are affecting it.

Energy and Transportation

• Energy is causing a delay in the CPI's increase, pushing overall numbers down until 2024.

• Transportation has seen a negative month-on-month movement for the first time during this long inflation spike.

• Shelter is carrying the rest of inflation upwards because it lags behind price movements in rent and house prices.

Shelter and Inflation Indicators

• Shelter makes up one-third of the total index, so if it were not counted, April's overall inflation number would be at 3.3%.

• Long-term shelter is heading down but will continue to sit artificially high throughout summer.

• Every important core metric of inflation is going down, including food which has stopped being stubborn.

Federal Open Market Committee Meeting

• The next meeting for the Federal Open Market Committee is happening on June 13th and 14th.

• There will be one more inflation read before the FED decides what to do.

• Lending environment is tight; businesses are putting off investment because they don't want to take on expensive financing.

Interest Rates

• Four members of this committee said that interest rates at the end of 2024 will be higher than they are today.

• There is no chance rates are going down just like there was no chance that rates would go up in 2021.

• Shelter will stay high next month, and this means that at the next meeting, they can hold rates flat.

The Federal Reserve and Interest Rates

This section discusses the issue of interest rate increases and the role of the Federal Reserve in managing them.

Interest Rate Increases

• Interest rates at 5.25% are reasonable historically, but the problem is the relative size of the rate and its speed of increase.

• Commercial real estate loans carried by regional U.S banks will have to be refinanced, which will be a challenge given that many are worth trillions of dollars.

• Refinancing these loans has become more expensive, with monthly cash flow costs sitting at about 80% higher than at the start of last year.

• High mortgage rates can exacerbate problems in the housing market, which has already slowed down under record pace.

• Businesses looking to borrow money to grow are not borrowing, which could affect the economy.

The Role of the Federal Reserve

• The US GDP is being directly affected by the inability of the Federal Reserve to do their job and admit they got it wrong.

• Inflation is on its way down, but jobs are doing great and unemployment is at record lows.

• Every month that FED dallies because they promised that they would keep rates high for someone for next two years, US economy feels pain needlessly.

• Banks may begin collapsing or be at risk due to over-tightening by FED without any good reason.

What Will Happen Next?

This section discusses what might happen next if inflation continues to decrease while interest rates remain high.

Inflation and Interest Rates

• Quantitative tightening is technically still in effect, and banks are going to be stressed.

• Q2 GDP might come in looking abysmal if inflation continues to decrease while interest rates remain high.

• The Fed may send the US economy into a potential downward spiral just because they want to save face.