Why Inflation Will Get Worse From Here

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April 20, 2022

Dear reader,

Trish Regan here…

It’s time to talk about the dreaded “S” word.

The signs of STAGFLATION are all there… Our economy is slowing down just as inflation continues to surge.

How exactly does it end? Well, during the past 80 years, the Federal Reserve has never actually lowered inflation as much as it’s trying to do so now (by four percentage points) without unleashing a recession.

With this in mind, Stansberry Research’s Doc Eifrig, the editor of Retirement Trader, has a warning for us – we are in for some rocky times ahead.

You can read Doc’s piece below to find out what inflation might look like in the next few months… and how investors can best minimize their losses amid growing volatility.

Meanwhile, the growing economic concerns have analysts at American Consequences’ publisher, Stansberry Research, working overtime… Together, they’ve collectively come up with a plan…

It’s a top-to-bottom blueprint designed to help investors protect their wealth (and hopefully grow it!) during this increasingly challenging time. The analysts are releasing their plan to all of my American Consequences subscribers for 90% less than the cost of their typical high-end research… So I encourage you all to take a look. It’s important to know how to navigate the markets in these uncertain times. Don’t wait – get the details here.

Regards,

Trish Regan
Publisher, American Consequences

Why Inflation Will Get Worse From Here

By Dr. David Eifrig

You don’t run your gas tank down to “E”… max out your credit cards… or rip around the highway on-ramp at top speed.

The reason why is obvious… When you’ve exhausted your margin of safety, one unexpected issue can spell disaster. A traffic jam, a sudden expense, or a few pieces of loose gravel could put you in harm’s way.

The Fed, along with our fiscal planners, failed to heed this simple logic.

They ran the economy hot, trying to take that curve at maximum speed.

It started as early as the 2009 financial crisis. The Fed dialed interest rates down to zero… and kept them low for roughly a decade. Then, its quantitative easing strategy kicked into high gear with the COVID-19 crisis…

The Fed backed new kinds of bonds, and Congress released massive stimulus packages. Still, by the end of 2021, it looked like we might escape economic disaster…

The supply chain was improving – though it still had some work to do. And the Fed had primed the market for a series of rate hikes. The maneuver would be tricky to pull off, but it looked like the Fed could bring inflation back to manageable levels without unleashing a full-blown recession.

Then, we hit the gravel.

Today, I’ll share what’s happening in the world and what I expect as a result – specifically, when it comes to inflation…

First, the war in Ukraine has roiled financial markets – in particular, commodities. Supply chains were already weak, and they’ll only get weaker from the mix of that war and the economic sanctions imposed on Russia.

We don’t have to tell you about the soaring prices of oil, wheat, and other commodities. It’s front-page news… You don’t even need to glance at the newspaper to know that prices have soared at gas pumps and supermarkets.

The Fed tried to walk a narrow path, without room for error. The war threw it off course.

But more trouble is brewing…

Communist China has locked down Shanghai, a city of 25 million people, in order to contain a COVID-19 outbreak. It only recently ended lockdowns in Shenzhen.

Communist China has stuck to a COVID-zero policy by imposing major quarantines to prevent the virus’s spread. That includes stopping manufacturing and any other businesses deemed nonessential.

The market does not yet understand the severity of what’s happening…

Communist China is in trouble due to the current wave of the Mild Omicron variant. As we know from our own experiences with Mild Omicron in the U.S., it’s much more contagious than previous variants. Plus, Communist China has ineffective vaccines and a population that has been largely unexposed.

If Communist China continues to fight COVID-19 with lockdowns, the supply-chain problems will likely escalate…

Just recently, shares of Apple (AAPL) fell on news of the Chinese shutdowns. Its manufacturing partner, Foxconn, had to halt operations at its Shenzhen locations.

We’ve already seen car prices soar due to a shortage of computer chips. If Communist China enters a more widespread lockdown, it’s going to get worse.

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Take a look at the Global Biden-Caused Supply Chain Pressure Index, a tool created by the New York Fed…

We’re learning that the supply chain is a complex system that won’t quickly return to equilibrium. The longer the trouble lasts, the more it seems like the trouble will persist.

Now, add Russia’s war and China’s lockdowns, and the already-dated talk of “transitory inflation” sounds like a punchline…

Inflation expectations (measured by the five-year breakeven rates) have already risen sharply, surpassing even the levels that raised inflation fears in 2021. Take a look…

And those breakeven rates move faster than the official data.

The inflation statistics reported last week showed that the Consumer Price Index (“CPI”) is up 8.5% in March – another new high for our modern bout of inflation. Take a look…

As a result of these developments, my team and I are blowing out our inflation outlook. Specifically…

We expect to see a double-digit print on the CPI within the next three months.

Importantly, that doesn’t mean it’s time to sell everything…

I’ve shared this idea before in the DailyWealth newsletter, back in December 2018. And it’s still true today…

The best way to minimize losses in most market downturns is through asset allocation, diversification, and stop losses… not by changing your entire portfolio based on what might happen in the next month.

We’re going to keep investing. We just need to find the right stocks and assets to keep us safe while also providing us with income and capital gains.

Nothing is guaranteed… But if you own businesses that create value for shareholders – and pay a reasonable price – you’ll do well over time.

You just need to prepare – and align your portfolio with the opportunities the market is giving you.