Coping with Inflation and the Market

Hello, Power Profit Traders!

The normal range of inflation is in the neighborhood of 2%-3%, and since the U.S. is still suffering from the highest inflation seen in decades, the Fed still has rough roads ahead.

There may be much more turbulence in our future because high inflation makes the stock market more volatile and lowers valuations of equities – transpiring into more weakness and potentially negative real returns.

You know what to expect in a low-inflation environment – economic growth.

With persistent high inflation in the U.S., economic growth can be squashed and it certainly increases the risk of a deep and wide recession to the world’s economy.

I think the important thing to do is have an awareness of what’s happening so you can plan ahead and be prepared.

I’m sure it’s no secret to all of you regarding the pain you’re experiencing with the high inflation. It has eroded the value of income, savings and even your investments. With this high inflation, you’ve reduced your buying power.

If you’re feeling the pain, you can believe companies are as well, and it’s affecting their bottom line as well. As they pay for raw materials and run the factories, their buying power is affected, and you know they’re passing the cost of inflation on to consumers – you and me.
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At over 9 percent this year, it’s going to take some time for inflation to return to normal levels.

Under stressful economic conditions you can count on equity valuations to be driven lower – and it will take time to rebalance stock prices and their intrinsic worth. There may be a lot of job losses and lower stock prices before this happens, however.

When it comes to trading, it’s possible to benefit when volatility rises higher.

Even though we don’t like inflation, it can put pressure on the stock market and make it more volatile. The market has already been fairly volatile this year, but with increasing interest rates and a slow decline in inflation (and possibly upcoming stagflation), we can expect more, and potentially stronger, volatility than we’ve already seen.

I think having an awareness about the economic surroundings is important, and then having a game plan in place is critical.

That’s why my focus has been on identifiable patterns in the market and applying rules to trade those patterns. I find it important to be prepared and follow specific rules when trading under the stressful market and economic conditions.

You’re invited to my discussions each week.

Be sure to join me at 12:00 p.m. ET each Monday, Tuesday and Wednesday for insights on current market conditions and what is to come.

See you soon,


Tom Gentile
America’s #1 Pattern Trader

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