The S&P 500 almost broke its all-time high yesterday after another strong move higher. It is pretty clear at this point that inflation is really not a problem after the Fed acknowledged that inflation did surpass the Fed’s inflation predictions. That sounds like a contradictory statement and it is but, in the world of markets and Fed talk, there is confidence in the Fed that will contain inflation if it goes too far. At least that is what the bond market is communicated by holding the 10-year treasury at a rate of 1.5%. As you know I am in the camp of transitory inflation and eventually disinflation again after supply disruptions subside. There are however risks of long-term housing constraints that may continue to create higher real estate prices for several years to come. That is real inflation and it may eventually affect the stock market. The pandemic has changed the way that we want to live and commute and I don’t think that we will go back fully to the way we were. More on that subject in my next newsletter.
Talk soon,
Al Losada
Founder | SimpleOptionStrategies.com
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