Wednesday was a day where you had to read well below the fold to figure out what’s going on. And we did just that… The media was focused on the wrong thing — of course — while we looked at which assets to own during periods of inflation.
Most financial media outlets were focused on the weekly jobless claims number, which came in historically low…
Source: CNBC
Yes, 1969 is a long time ago. And that’s the last time weekly jobless claims came in this low… But if you look at the data, you see a pattern emerging.
First, jobless claims typically dip around the holidays. Eliminating the past two years can show that trend… only in 2019 were they rising at an appreciable clip, and that foreshadowed a recession.
Source: Bloomberg
But more importantly, the rate of hires has been steadily picking up since the beginning of the year.
Source: Bloomberg
In general, a positive story… but there’s a catch.
Which Assets to Own During Inflation
Mortgage purchase applications were up 4.7% week on week, and accelerating.
Source: Bloomberg
Secondly, Personal Consumption Expenditure accelerated significantly in October, up to the highest point in 30 years.
Source: Bloomberg
With durable goods also ticking up — despite being held back by a decline in private aircraft prices — it’s clear that the economy remains in the throes of inflation.
Whenever inflation is rising, backtesting over the past 40 years shows that the following assets to own during periods of inflation are:
Source: Fortune Research
We went long the iShares Russell 2000 ETF (NYSEArca: IWM) Tuesday for this exact reason.
Those other assets are all just fine as well… Believe me, I have been desperate to put Bitcoin (BTC) or the Grayscale Ethereum Trust (OTC: ETHE) back into this watchlist.
But the Russell 2000 was simply down the most… and I want to keep things simple.
As to the “why…” Although I’ve said it a million times, I’ll say it once more here…
When inflation is rising, it’s your duty as an investor to own the things that are inflating.
And while it’s true that inflation won’t rise forever, it’s most certainly rising now.
So keep it simple… own small caps, retail, energy, crypto, tech and banks for the next few months.
If I had to pick one on our watchlist, Petco Health and Wellness Co. Inc. (NYSE: WOOF) is at an attractive price right now.
Source: Bloomberg
But honestly, most everything else except for energy is at the wrong end of recent trends.
As such, we may re-jigger the watchlist significantly next week.
In the meantime, though, I’ve got the Thanksgiving holiday on my mind and am ready to wind down for a few days… It has been a long month.
To that point, though, I just wanted to say I appreciate all of you for reading.
I’m truly grateful that I get to muse on these ideas for a living, and I’m thrilled that you all are along for the ride with me.
So Happy Thanksgiving, everyone…. I’m so very thankful for each one of you.
All the best,
Matt Warder
Fortune Research
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