It\u2019s not just Wall Street that\u2019s worried about stagflation, the dangerous combination of a slowing economy plus rapidly rising prices.<\/p>\n\n\n\n
The chart below shows worldwide searches on Google for \u201cinflation\u201d (line in blue) and \u201cbearish\u201d (red). Given that concerns about both inflation and economic contraction may be self-fulfilling, the rise in interest in recent months is worrying.<\/p>\n\n\n\n
Google Trends searches for \u201cinflation\u201d and \u201cbearish\u201d<\/p>\n\n\n\n
For Jay Capel, Senior Research Analyst at Sentiment Trader, the inflationary environment in particular is making life very difficult for investors.<\/p>\n\n\n\n
\u201cIt seems like there\u2019s nowhere to hide. There\u2019s a real cash crunch, stocks (and bonds) are falling, and even gold isn\u2019t doing what we\u2019re told. was that he should,\u201d he says.<\/p>\n\n\n\n
But they have found what they describe as a simple strategy \u2014 switching between consumer-oriented and discretionary spending exchange-traded funds \u2014 that has helped investors outperform during periods of extreme price growth.<\/p>\n\n\n\n
\u201cFor our purposes, extreme inflation occurs when the consumer price index rises by more than 3% from its level a year ago. Excessive deflation occurs when it falls by 3% or more (we\u2019ve seen it decades ago). Done),\u201d says Keppel.<\/p>\n\n\n\n
His chosen vehicles for this trade are Consumer Staples Select Sector SPDR Fund XLP, +0.49% and Consumer Discretionary Select Sector SPDR Fund XLY, -0.86%.<\/p>\n\n\n\n
The execution is as follows. If the latest CPI inflation reading (taken at the end of the month) is greater than or less than 3% or minus 3%, the XLP is held during the following month.<\/p>\n\n\n\n
But if the latest CPI is moderate within the plus\/minus 3% range, then XLY is held for the next month.<\/p>\n\n\n\n
For baseline, the switching strategy was compared with a 50\/50 split between two funds, each rebalanced at the end of the year. In short, this strategy is taking advantage of the tendency for consumers to spend relatively more on staples during periods of high inflation.<\/p>\n\n\n\n
And the result? According to Capel: \u201cSince the first full year after these funds were founded in 1998, the switching strategy returned +1,397%, nearly triple that of the rebalancing strategy. And it did so while facing a smaller maximum loss and low down years.\u201d fell.<\/p>\n\n\n\n
\u201cThere are not many ways to hedge against inflation, but switching between these two funds has been an effective method,\u201d he concluded.<\/p>\n\n\n\n
The S&P 500 futures ES00 fell -0.33% 7 points, or 0.2 percent, to 3963. The dollar index DXY, +0.49% rose 0.1 per cent to 106.58 and gold GC00, -0.13% 0.2% to $1,722 an ounce. Bitcoin BTCUSD is down -4.78% by 4.8% to $21,100. Crude oil futures CL.1, +1.78% rose 2.1% to $98.70 a barrel.<\/p>\n\n\n\n
Walmart WMT, -0.14% stock sank after a profit warning citing the impact of inflation, beating other retailers such as Amazon AMZN, -1.05%.<\/p>\n\n\n\n
European gas prices jumped again, with the ICE Dutch TTF gas futures contract up 7.2% to 189.25 euros per megawatt-hour after Russia further cut supplies.<\/p>\n\n\n\n
US second quarter earnings season continues. 3M MMM, General Electric GE, +0.25% and General Motors GM, -0.43% publish numbers before the market opens. Alphabet GOOG, -0.14% and Microsoft MSFT, -0.59% followed the closing bell.<\/p>\n\n\n\n
US economic data on the slate includes the May S&P Case-Shiller national home price index at 9 a.m., the July Consumer Confidence Index and new home sales for June, both at 10 a.m., all Eastern.<\/p>\n\n\n\n
Much was done last week in a Bank of America survey that showed fund managers are spectacularly pathetic. So much downbeat, in fact, that things with multiple logic can only get faster. Here is another example of extreme caution. The charts from JPMorgan note that open interest on the CBOE VIX call at a strike price of 40 or higher has recently reached record highs. A VIX spike above 40 only occurs when the market takes a dive. A lot of people are betting\/hedging for this.<\/p>\n\n\n\n
Here were the most active stock-market tickers on MarketWatch as of 6am.<\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" It\u2019s not just Wall Street that\u2019s worried about stagflation, the dangerous combination of a slowing economy plus rapidly rising prices.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[254,3421,3422],"tags":[3457,888,3425,3636],"_links":{"self":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/10465"}],"collection":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10465"}],"version-history":[{"count":1,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/10465\/revisions"}],"predecessor-version":[{"id":10466,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=\/wp\/v2\/posts\/10465\/revisions\/10466"}],"wp:attachment":[{"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10465"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10465"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/blog.jlbn.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10465"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}anchor<\/strong><\/td> security name<\/strong><\/td><\/tr> GME, -5.03%<\/td> GameStop<\/td><\/tr> TSLA, -1.40%<\/td> Tesla<\/td><\/tr> Xella, -0.25%<\/td> Excella Technologies<\/td><\/tr> AMC, -3.81%<\/td> AMC Entertainment<\/td><\/tr> AMZN, -1.05%<\/td> heroine<\/td><\/tr> NiO, +0.47%<\/td> NIO<\/td><\/tr> AAPL, -0.74%<\/td> Apple<\/td><\/tr> RDBX, +81.97%<\/td> redbox entertainment<\/td><\/tr> WMT, -0.14%<\/td> walmart<\/td><\/tr> SNDL, -0.50%<\/td> solarium producer<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n