If you’re on top of the financial news, you’ve heard the dreaded word “inflation” being thrown around.
Fed policy makers generally consider a core inflation rate of 2% or lower acceptable.
The U.S. labor department reports that the current core inflation number right now is 3%, 50% higher than ideal.
The bottom line is that stuff costs more than it did pre-Covid, and it may get even more expensive before things cool down again.
That means a bearish storm may be brewing.
And fortunately for you, I’ve got some downside plays all ready…
How Inflation Works – And Why It Affects You
Let’s break this down in simple terms.
Investopedia defines inflation as “… the decline of purchasing power of a given currency over time.”
In order to track the rate of inflation, you look at a basket of selected goods and services in an economy, and see how much the price goes up over a set period of time. (The only basket of goods not included in the core inflationary number is food and energy.)
If the price goes up while the items themselves stay the same, that means a unit of currency is worth less and less as time goes on.
When the inflation number is going up – as it is right now – stuff costs more for you, for me, and for businesses.
We buy less and it costs more for companies more to produce goods and services. Although the impact on you and me is less severe, it’s a very bad combination for company revenues and profits. Earnings will suffer.
Of course, declining company earnings means one thing for stocks. Stock prices will drop.
The Federal reserve puts the brakes on all of this by raising interest rates. Although the Fed has signaled that it has no intention of raising rates, that may be in the cards in the near future. Higher rates are also bad for stocks.
For now, a bearish storm is brewing, and you need to be ready for a potential market correction.
Three Ways to Protect Your Money (And Make A Nice Extra Windfall)
- Lighten up on your stock portfolio.
- Move your money into safety assets like gold and silver.Gold is considered a hedge against inflation. The price of gold is already rising. You can buy physical gold, buy gold futures or easier still, take a position in the SPDR Gold Shares ETF (NYSE: GLD). This is a stock that tracks the price of gold and will rise with a higher ROI than a physical gold position.
- Hedge your stock portfolio with cheap put options.Put options increase in value with a drop in the underlying stock. Buying put options on market ETFs like the SPDR S&P 500 ETF (NYSE: SPY), which tracks the S&P 500 will increase in value should the S&P 500 drop. Think of them as insurance for your entire stock portfolio.Buy cheap (<= $1), longer-term, Out-Of-The-Money (OTM) Puts on the SPDR S&P 500 ETF (NYSE: SPY).
For example, right now you could buy Aug 20, 2021 $300 Puts for $1.00 and provide a nice 3-month hedge that will profit should the S&P 500 correct.
Of course, no one knows for sure which way the market will go next, but with a strong possibility of a correction, it’s time to batten down the hatches.
One of my favorite things about trading patterns is that they work all the time.
My tools find the money no matter which direction the market is moving – and there’s a tremendous sense of security in that.
That’s why I want to make sure you get your invitation to my Money Patterns Mastery Boot Camp.
My boot camp is designed to share with you the top techniques and tools for targeting returns in amounts like 100%… 200%… even up to 400% in 30 minutes or less – all by exploiting my favorite profit patterns. After ten years of rigorous backtesting, these patterns have proven to be some of the most successful, reliable ones I’ve seen in my three decades of trading.
Starting on June 1, you’ll join our small group for six incredible weeks of action-packed training.
Not only will you be receiving my hands-on, live sessions, but I’ll also grant you access to my professional trading tools and dish out a new money pattern recommendation each week so you can put what we are covering into action.
I can’t wait to share this with you, so go here now to reserve your spot.
See you then!
Tom Gentile
