With inflation dominating headlines, many of you have been wondering how it impacts your stocks.
I can’t stress enough how important inflation is… But it directly impacts the Federal Reserve, easy money and, more importantly, your bottom line and stocks. The Fed has a dual mandate: keep inflation near 2%, and unemployment as low as possible.
That’s it. That’s all the Fed has to do is those two things.
Off and on since 2009, the Fed has had the pedal to the metal as far as easy money goes. And it’s directly impacted the market — thankfully for the better.
But inflation had been relatively low, which is why the Fed kept pumping money into the system. But now, things are starting to change…
In late 2020, the Fed changed its mandate and said inflation should now be “an average” of 2%, which means it can go above 2% for periods of time and things will be OK. In fact, the annual inflation rate soared to 4.2% in April, up from 2.6% in March and well above forecasts of 3.6%…
It’s the highest rate of inflation since September 2008.
Meanwhile, the central bank has continued to keep interest rates near zero while pumping money into the system, even if inflation goes above 2% — which is a huge change in policy.
With the Fed, it’s all about reading between the lines of what it says. So how does inflation impact stocks?
To figure that out, we need to look at prices. Check out my short video and I’ll show you the charts and prices, and you can see for yourself inflation impacts stocks… and how bad it is. Because to tamp down inflation, the Fed will have to raise interest rates.
And the stock market isn’t going to like that much…
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