As we all know, inflation has been the No. One market risk for this year and it continues to be THE major concern for nearly everyone in the market! So the direction of inflation is paramountly important for the overall market direction in the months ahead. Here is what I think: based on the very long term trend of inflation, it seems to me that inflation has peaked by now and the next major direction for it is down.
Here's a chart of the year-over-year ("YOY") change of consumer price index ("CPI")… this data goes back more than 100 years to 1914.
As you can see by the simple trendlines, inflation has hit its upper band of the long term channel and is heading down. Given this is a century long trend, this resistance is really a major one to overcome and I don't think it can and will. As such, here is my bold call: INFLATION HAS PEAKED NOW!
Having said that, let me be clear: this does not mean the market has necessarily bottomed by now. We may very well continue to see volatility for a while with the market hitting its final bottom in a few months time. There is still a good probability that we may see a 10-20% plunge before we can finally claim the bottom of this bear market!
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