Oct. 17, 2022
Here we are in October, and the Fed still hasn’t killed inflation. Or even managed to slow it down.
Kind of appropriate, given the month.
It was invisible at first, something that most people didn’t even realize existed.
Then, when it made its presence known, it was largely written off by skeptics and people who were invested in it not being a threat.
Then, when it started actually doing harm, it was too late to ignore.
And now it’s rampaging.
Inflation has become that seemingly unstoppable menace, always lurking, ready to destroy everything in its path. It shrugs off everything that’s thrown at it and those trying to stop it grow increasingly desperate.
In those kinds of stories, the menace is usually only stopped at great cost. It looks increasingly like that’s going to be the case here. Last week, the September Consumer Price Index (CPI) numbers came out and showed that inflation continued going up. It was an 8.2% increase year over year. That was only slightly lower than summer highs, but still the highest in 40 years.
Prices continued to rise in many of the areas you’d expect, with food and housing being the leaders. The few indexes that thrived did so at a lower rate than analysts expected.
The markets went down on the news as it became apparent that, no matter what the Federal Reserve does, they can’t get inflation to go down.
So now, it seems even more likely that there’s going to be yet another rate hike before the end of the year. Just about everyone assumed this was going to be the case, but that doesn’t make the inevitable reality of it any easier to swallow on this latest news.
And this is causing everyone to take the idea of a recession even more seriously. Even President Biden said that one was possible. In his words: “I don’t think there will be a recession. If it is, it’ll be a very slight recession.”
He’s filling the role of that one character who tries to convince everyone else that the situation isn’t as bad as it looks despite evidence showing otherwise. But the fact that even he can’t ignore it says enough.
So, you’re going to hear more talk about the Fed getting aggressive in trying to stop this. You’re probably going to see news stories in the coming months about people spending less on Thanksgiving dinners. Santa himself may have to scale back what he puts under the tree this year. You’re definitely going to hear more anecdotal stories about people who have to choose between putting gas in the car and food on the table.
We’re at the point in the story where the menace has shown what it’s capable of and no one’s sure what to do short of hoping they aren’t the next victim. There’s going to be a lot more destruction ahead before something works and the threat is forced into retreat.
The danger is already here and isn’t going away any time soon, so the best thing anyone can do is learn as much as they can about it to protect themselves.
The market volatility we’re seeing is chaotic, but not completely unpredictable. As some (most) assets go down, others respond conversely.
Surviving this market is a matter of finding those assets and using them to protect your wealth until the danger passes.
As we head into a turbulent and uncertain Q4, investing defensively is going to be the most surefire way to be among the few left standing when this finally ends.
Editor, Daily Profit Cycle