🔥🔥 The Fed and Inflation are hot - should You panic too?
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Inflation has been running hot in the US at 6.8% compared to a year ago as supply shocks, money printing and a shortage of cheap energy has kept demand high. The Fed sets interest rates in the US and at their latest meeting, they have panicked - projecting as many as 3 rate hikes in 2022 as inflation is no longer ‘perceived’ as transitory, in their view.
So should you panic too?
The Fed might simply be - again - behind the curve and reacting to lagged effects as the above mentioned drivers (supply shocks, money printing, energy shortage) tend to take time to ‘feed’ into the economic data.
There is a valid saying in the markets - ‘Never fight the Fed’ - but if the (financial) markets were really worried about higher inflation, then inflation proxies such as oil, copper, gold, commodity stocks such as etc. would be rising high - instead they already peaked a few months ago.
The markets tend to be forward looking and so should You.
Indeed, our most trusted ‘LongShortBets Inflation Model’ predicts that US inflation (CPI) would decline from +6.8% to approx. just +3.0% next year - still high but much lower than the Fed seems to ‘fear’. The model below (white line) seems to predict the actual CPI inflation level (purple) quite well during the last 20 years.
So if inflation turns out to be less of a threat than the Fed expects now, then tech stocks could be the place to be in 2022 …
… and just on time, we have received a timely ‘insight’
Score 8.6 (out of 10): NASDAQ 100 E-MINI sets up for +7.6 rally in 3 months
NASDAQ 100 E-MINI has triggered a new high volatility signal (1 month). During similar occasions, NASDAQ 100 E-MINI had a median return of +7.6%, over the following 3 months – based on 10 historical occasions with 9 of those showing positive returns (90%). This buy signal for NASDAQ 100 E-MINI received a high score of 8.6 (out of 10). This insight was generated on 2021-December-17 with last price of 15,717.
We found 3 months to be the optimal trade horizon, after testing a number of possible alternatives (accuracy of previous returns). Otherwise consider closing out this trade once the target level of 16911.56 (+7.6%) has been reached. Based on NASDAQ 100 E-MINI’s recent up and down swings, LongShortBets suggests considering to set a stop loss level for this insight at 14907.82 (last price at 15717.32), which is equivalent to a -5.2% decline.
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