The bond markets are closed but we’re in full swing as the markets open today in a volatile environment.
Despite the Fed pushing interest rate increases – and with plenty more to come – it’s likely core inflation will continue to swell.
Allianz Chief Economic Adviser Mohamed El-Erian predicted that core inflation “is still going up.”
The good news is that it is going to come down… eventually.
The bad news, as he puts it, is whether it comes down “with a slowdown in the economy or a major recession.”
That’s a heck of a choice…
Futures are down heading into this morning. And we should remember that core inflation excludes food and energy… both of which are probably heading up.
Energy especially is going to be troublesome.
The relationship between the United States and Saudi Arabia has essentially been broken and oil prices are nearing $100 a barrel again. The main thing holding them back is the possibility of a recession and lowering demand.
And yet the American economic picture still remains better than most other nations. The US has managed to pull the entire European Union behind its economic and geopolitical agenda.
Russia and Iran are suffering crises that could endanger the very survival of their regimes.
Ukraine just struck a devastating blow to Russian military ambitions in the south of the country.
Still, the American economic situation is perilous…
The Fed’s balancing act of trying to stop inflation while not pushing the country into recession appears to be failing. The fact that we have it better off than the rest of the world is little comfort.
This is going to be a wild week, with a host of critical market indicators including the Consumer Price Index, major banks reporting, retail sales data, and more statements from Fed officials on inflation.
No holiday for us today. It’s a hot landing zone, so be ready to hit the ground guns blazing.
Keep Moving,
Any strategy that makes you money consistently is worthwhile.
Though many new traders believe that trading is primarily about indicators and tools, Chris maintains that it is at least 95% about emotional control.
This is especially relevant in this bearish, choppy market which has made the trading world extremely difficult.
Learn some pro tips to come back from your losses and stay in the game.
WORD ON THE STREET
Inflation Heading Up, Crimea Bridge Down, Musk Buts In On Taiwan
- Russian Bridge To Crimea Damaged – President Vladimir Putin called an emergency meeting of his security council after a key bridge that links occupied Crimea and Russia was damaged. While repair work is already underway, Ukraine celebrated the strike as a way of weakening Russian forces in the south. President Putin called it a “terrorist” attack, which may suggest that the “Special Military Operation” is about to be upgraded to a “Counter-Terrorist” Operation, which would allow Russia to deploy additional forces and weapons.
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El-Erian Doubles Down On Doomerism – Allianz Chief Economic Advisor Mohamed El-Erian said America “still has an inflation issue,” predicting that headline inflation will decrease but core inflation (which excludes food and energy) is still heading up. He added that while OPEC+’s decision to cut oil exports wasn’t a surprise, “it’s certainly not good news for the U.S. economy.”
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The TecnoKing Thinks He’s Kissinger – Elon Musk caught hell when he broached a peace plan for ending the Russia/Ukraine war, but that hasn’t stopped him. He’s now offered a suggestion to settle the dispute between Taiwan and the People’s Republic of China. He suggested a “special administrative zone for Taiwan that is reasonably palatable.” China welcomed the suggestion, while furious Taiwanese officials said that its “democratic freedoms” are not up for discussion.
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The Chip Wars Have Begun – China suddenly finds itself relying on its own resources after the United States passed new restrictions on the transfer of advanced semiconductors to the People’s Republic. Chinese chip stocks including Semiconductor Manufacturing Corporation, Hua Hong Semiconductor, and Shanghai Fudan Microelectronics Company all plunged this morning.
HOT SPOTS: What’s Going on in Geopolitics
- Russia Advances Near Bakhmut, Kyiv Hit – Russian troops near Kherson remain braced for a major attack, but Russia is advancing again in other areas. Troops from the Kremlin linked Wagner private military company are fighting to claim the key Donetsk settlement of Bakhmut, though they don’t yet have full control. The Ukrainian capital of Kyiv was also hit with air strikes for the first time in months, perhaps a sign that Russia is looking to escalate.
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China Prepares For Leadership Conference –The Chinese Communist Party is about to host another Congress and it is expected to give President Xi Jinping another term. The Politburo will also be reshuffled, as well as the central committee. Many speculate that the seemingly arbitrary “zero-COVID” policies and attacks on some officials have all been part of a shadow war between President Jinping and his opponents within the party. We’ll know soon if China’s de-facto dictator has managed to crush his foes.
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“Indestructible Brotherhood” Turns Out To Be Destructible – One day before military exercises were to be held for the Collective Security Treaty Organization, Kyrgyzstan unilaterally canceled them. The fact they were to be called “Indestructible Brotherhood-2022” adds to the embarrassment. It’s another sign that Russia is having a hard time coordinating its Central Asian allies as it struggles in Ukraine.
CUTTING EDGE: What‘s Happening In Tech
- One MILLION Usernames Compromised – Meta Platforms (META) faced further woes as it had to tell about one million Facebook users that their login information may have been compromised. The company also said it had discovered 400 different apps that allowed bad actors to steal information. Imagine the apps they don’t know about.
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Peloton Lays Off Another 500 People – The struggling home fitness company is cutting its workforce to the bone as it tries to regain its pandemic-era momentum. At the end of June 2021, the company reportedly had 6,700 employees. After these latest layoffs, the fourth round this year, it will only have 3,825 employees.
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Chipotle Rolls Out Robotic Worker – Chipotle, like many other food service companies, is facing unionization drives. Well, there’s one answer to that – robotic workers. “Chippy,” an “autonomous kitchen assistant,” is being rolled out at a location in California. The robot should be able to make tortilla chips that are deliberately “imperfect,” showing the ability of machines to make food that doesn’t look perfectly uniform and alienating.
FOR YOUR CONSIDERATION
With a market this volatile, Options Expert Chris Hood doesn’t trade on the news… just on his indicators. He’ll show you how to break down one especially useful chart so you can enter this week with confidence.
Don’t get pushed around by journalistic hysteria – stick to the numbers, the facts, and the tools with a proven record of success.
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