Wednesday, July 17, 2024

♟ More Inflation After 2024 Election?

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"Regardless of who is in power, they're going to print money."

Karim Rahemtulla, Head Fundamental Tactician, Monument Traders Alliance

Karim Rahemtulla

Tech stocks sold off hard today, experiencing its worst day in three years.

But should it surprise you?

After all, a market hitting all-time highs with only a few stocks involved is never healthy. Nor is a 3-year high RSI on the S&P 500 ever a good thing.

So with the Fed cutting rates sometime between now and September, shouldn't that curb inflation and boost the market?

Well, not necessarily.

Earlier this week, former President Donald Trump nominated Sen. JD Vance as his Vice Presidential running mate.

I want to be clear that Bryan and I don't deal with politics in The War Room or Catalyst Cash-Outs. In fact, we encourage all our members to keep their political opinions out of our chat rooms.

However, this tech selloff is connected to the Republican party's economic stance.

And there was one key quote Vance made back in April that caught my eye.

Vance said...

"Devaluing is of course a scary word. What it really means is American exports become cheaper, and that's important. If you want to employ a lot of people in manufacturing, you need to make it easier for us to export, and not just import what we need."

I thought that quote was an important foreshadow for higher inflation in the U.S. in the coming years.

To sum it up - Vance wants to energize the export sector even more, which is a good thing because it boosts the economy.

But, historically there are only two ways to energize the export sector.

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One way is by making really good products.

The other way is to make your currency really cheap – which is what China is doing. They made the yuan really cheap so they can sell a ton of goods and the U.S. can't compete.

But if we devalue the dollar to compete with China – that means things are only going to get more expensive. We've seen worldwide inflation surge since mid 2021, and if we devalue the currency further, we can expect a higher inflationary phase in 2025 and 2026.

Sure, we might get a couple of rate cuts this year. But come 2025 and 2026, regardless of who is in power, they're going to print money.

And if that happens, inflation may came back with a vengeance.

To hedge against inflation, you'll want to be positioned in hard assets. We're already positioned in metals like Franco Nevada (FNV) in Catalyst Cash-Outs. We even have a long play in Bitcoin with the BITO ETF in The War Room.

We're in these hedges because right now everybody thinks interest rates are going to go back down to 2%. That's how the market is positioning itself right now.

But my experience tells me that when 90% of the market is on one side of a trade, that means the pendulum is about to swing the other way.

The truth is... this is what Wall Street is known for. Too many traders pile in expecting a specific move, then there's a sell-off, and all the traders that stayed in are left holding the bag. We don't want to be the ones holding the bag.

So if interest rates don't go down and inflation spikes, you need to have a portion of your money in things that will offset the decline in purchasing power – like hard assets.

In addition to hard assets, one of the reasons our Catalyst Cash-Outs portfolio works so well is we also do speculative trades to go along with our hedge plays. This allows us the chance for profits in any scenario and get the best of both worlds. And if inflation picks back up, you'll be happy your portfolio has hard assets.

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In fact, yesterday in Catalyst Cash-Outs I issued a trade on an artificial intelligence-based pharmaceutical company. This company has multiple catalysts going for it right now, including drug approvals plus Phase 1 and Phase 2 trials. Any of those catalysts could result in a boost in share price.

To get my exact trade on this pharma company, click here to join Catalyst Cash-Outs.


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