Consumers are feeling the burn🔥

Inflation across the board remains high, but will we see relief soon?

  • The last 2 years in the economy & markets have been a wild ride.

  • A few major catalysts have been driving prices higher across economies.

  • Higher prices have consumers feeling the burn.

  • One Hedge Fund called BS on the transitory story.

Will the chaos ever end? 

From 2020 filled with Covid, lockdowns and stimulus to inflation reaching 4 times the Federal reserves target rate of 2% inflation.

This current inflationary enviroment we are in should be no surprise. With the amount of stimulus pumped into the system, it was a disaster waiting to happen. Russia & Ukraine was the icing on top with energy prices rocketing.

 

 Really Jerome?

During '20/'21 we heard rhetoric from Powell emphasizing "transitory" inflation. Simply meaning, temporary. Boy oh boy Mr. Powell, a swing & miss. More like STRIKE OUT!

This in turn, caused the Federal Reserve to misinterpret the trajectory of consumer prices. Leading the Central Bank to hold of on raising the Effective Federal Funds Rate(EFFR)

The Fed was late to raise their interest rates, which has lead CPI to reach historical levels. The highest reading of 9.1% printed July 10th, and we have now ticked down to 8.5% August 10th.

Buring a hole in your pocket

These prices levels haven't went unnoticed. With inflation looking to be retreating, CPI is still rising at 8.5%. This increase in prices has eaten away at consumers purchasing power. It takes more currency to buy goods & services.

United states Business sentiment has also seen a substantial decline. You tend to see a correlation between consumer sentiment & Business sentiment. The United States economy is highly consumer driven.

One way to track overall consumption by consumers in the economy is looking at XLY. What is it exactly? We will let State Street explain!

Seeks to provide precise exposure to companies in retail (specialty, multiline, internet and direct marketing); hotels, restaurants and leisure; textiles, apparel and luxury goods; household durables; automobiles; auto components; distributors; leisure products; and diversified consumer services.

  Hedge Fund Calls bluff on Feds "Transitory" inflation

Wincrest Capital was one of the Hedge funds who caught on to the delusional transitory narritave in markets. Our guess is that this was an excellent trade for Wincrest for 2021 & 2022!

We believe the best opportunities are identifying mispricings or where the overall market is positioned on the wrong side. The transitory theme was one of these opportunities. What’s the next opportunity? Stay tuned..