Joe Biden thinks he can fool the American people.
Sure, our economy looks fine on paper.
But the average working-class family has less discretionary income to spend than before Uncle Joe lost his marbles.
Yet, the stock market acts like we’re about to skirt a recession and hit a growth spurt that will deliver us into the next bull market.
If you’re one of those who share this opinion, we’ve got news for you — our economy sucks.
Stocks have overestimated when and how much the Fed will cut interest rates.
Once investors realize their mistake, you can expect a nasty correction that will appear out of thin air.
We won’t pretend we know exactly where or when the market will top, or when it might find a bottom.
However, we will articulate why we believe the Fed can’t cut interest rates this year, ultimately leading to a significant market pullback.
Better yet, we’ll show you a simple strategy to generate daily income to help buffer your portfolio against any market corrections.
What the Fed Gets Wrong
Last week’s Consumer Price Index (CPI) data showed inflation had finally slowed to 3.4% in December.
But when you exclude food and energy, it landed at 3.9%.
We don’t know about you, but that doesn’t sound like inflation is under control.
So, why has the Fed stopped talking about rate hikes and begun to consider rate cuts?
The Cost of Shelter
It all boils down to housing, or as they call it, shelter.
The way the Fed calculates the cost of shelter looks at both home prices and rent.
While we can see the cost of rent currently advertised on sites like Zillow, it doesn’t capture the rent for units occupied by existing renters. And since rents change when leases expire, there is typically a lag before the change in costs show up.
The Zillow Observed Rent Index peaked in September and has fallen to the level it was at somewhere between July and August.
That’s a good sign for lower inflation in the future. And that’s what the Fed is banking on.
However, the other side of shelter inflation comes from housing.
Home Inventory & Pricing
The National Association of Realtors has reported pretty consistent declines in the volume of new home sales. Current inventory levels based on that pace put the total housing supply at 3.5 months of inventory.
However, the total inventory of single family homes at 1,000,000 units is well below the 1,500,000-2,000,000 units available in 2019.
In fact, there has been a steady decline in housing inventory since the Great Recession.
The oversupply created back in 2008 took us over a decade to work through. And it did quite a bit to keep inflation moderated during that time.
Now, we simply don’t have enough housing to meet our needs.
We can see the evidence in the single-family home data.
Despite lower total unit sales, home prices keep rising in every region of the United States.
Ironically, those adjustable rate mortgages that contributed to the Great Recession aren’t saving homeowners much these days, leaving them paying around 7.0-7.5% interest on ever-increasing home prices.
Given that shelter costs make up a third of inflation, it seems unlikely the CPI will see a meaningful decline in shelter costs.
Business Deflation
And we know this is the problem because the Producers Price Index (PPI), which came out on Friday, fell 0.1% month over month and remains up 1% from the prior year.
These are the prices that businesses pay for goods and services.
So, while they’re seeing meaningful deflation, consumers are not.
Countering the Trend
We expect interest rates to eventually fall but remain at around 5%, which is much higher than we’ve seen in decades.
Markets are NOT expecting this.
Current multiples suggest investors are looking for a rate below 5% by the end of 2024, which the Fed Watch Tool at the Chicago Board of Options Exchange confirms.
Once the market realizes its error, you can expect a violent selloff.
We believe the best way to counter this is to create a system that generates a daily payout.
Now, no one wants to be tied to their screens for hours at once. Most folks have jobs and families that take up their time.
So, we need something that’s simple, effective and fast.
What about a strategy that delivers:
- A 96% win-rate
- A trade that lasts about 15 minutes
- An entire plan emailed to you before the market opens
That’s exactly what Hugh Grossman’s Pick of the Day does.
He’s put together an incredible program for traders and investors of any experience level.
Every day, Hugh emails you the plan with the EXACT option to play and how to play it.
That way, you know what to do before the bell.
It doesn’t get easier than that.
And right now, he’s offering a special deal for Wealth Whisperer subscribers.
