Inflating Commodities & Countries

We continue through a regime of higher inflation.

It is now manifesting in the form of higher commodity prices.

For the record, the rate of inflation hasn’t been below 3% since March 2021.

It has “come down” from 40-year highs near 9%.

US Inflation graph

But it’s still going up at nearly 4% per year, and you can expect it to remain near that level through at least early 2025.

Bitcoin’s Magic Weapon Against Inflation

Bitcoin can do something that no traditional currency can do: automatically make itself more valuable. It does this by periodically limiting the supply of new Bitcoins — which has the immediate effect of cutting inflation and boosting the price.

It’s called the “halving,” and every time it happens Bitcoin investors make more money. The most recent halving is already at work... and it won’t be long before we see the price start to move (just as it’s done 3 times already). Find out why the Bitcoin halving will deliver enormous gains for investors.

One of our aims is to put that inflation in our accounts. We are doing that via copper and energy and gold. 

Outside of inflation, growth is the other major US economic indicator to watch. It is slowing but still positive, with Q1 2024 GDP coming out last month at 1.6%.

Real GDP graph

That’s down from 3.4% in Q4 2023 and 4.9% in Q3 2023. You can expect that to level off at 2-4% in the coming quarters.

It’s not quite stagflation because the growth hasn’t slowed enough. But it’s close.

On the S&P earnings front, Q1 numbers have been pouring out over the past few weeks. And they are better than decent. According to Factset, “On a year-over-year basis, the S&P 500 is reporting its highest earnings growth rate since Q2 2022.”

As of the first week of May, that earnings growth rate was 5%.

S and P Earnings graph

Markets being what they are, sectors with the highest earnings growth haven’t necessarily been the best-performing.

Intel Takes on Nvidia

It’s a showdown of epic proportions. Intel is fighting for its life, and putting $100 billion into rebuilding its AI chip program from the ground up. What does this mean for the $2 trillion AI supergiant Nvidia? 

And most important of all — how can you make money as an investor? Read our new update on this goliath vs goliath fight over market share, and how smart investors can score gains regardless of who wins. We’ve made 350%+ just last year... find out what we’re buying now.

Energy, for example, is reporting the worst contraction of earnings growth for the quarter but is the second-best performer over the past three months in terms of stock prices. Similarly but inversely, consumer discretionary stocks had good earnings but are the second-worst sector of the S&P this year in terms of share price. Here is the share price performance scoreboard for the year:

sector performance chart

The stock market may be an earnings discounting mechanism over the long-term. But in the short-term, especially with the advent of widespread ETF trading and large volumes of short-dated options, volatility and price are as — if not more — important. Rising materials and energy prices have been the main signal for us to increase exposures to those equity sectors.

Outside the US, several countries are emerging from slowdowns and/or recessions, particularly in Asia and Europe. India, which we allocated to last year, continues to be particularly strong on the growth front, printing 6.6% GDP in Q1. Though not growing as fast in absolute terms, European nations like Spain, France, Germany, Italy, and even the UK are set to see growing economies and stable inflation for the next few quarters.

We want to get bigger in what’s working, so let’s review the current overall positioning before getting into individual sector and company updates.

Here is what we own and what we’re buying this month…

Ed. Note: What you just read the introduction to the May issue of Foundational Profits, where I chronicle how I’m managing my long-term wealth. There are two new stock recommendations in this issue as well as an update on a recent blockchain position that we started. You can check out the issue here

Here’s to wishing our American readers a happy Memorial Day. Please take a moment to reflect and remember the men and women who sacrificed everything so you are free to pursue the life you want.

Call it like you see it,

Nick Hodge

Nick Hodge
Publisher, Daily Profit Cycle