You need to know this: The March Consumer Price Index Report came out this morning, and it revealed that inflation is plummeting. This is a huge sign that a massive stock rally is coming soon. If the current trend of significant disinflation persists, history suggests that a massive stock market rally is exactly what we will get.
Why? Let me explain.
Consumer prices only increased by less than 5% in March. In February, inflation ran slightly above 6%. That means the headline inflation rate plunged by more than 100 basis points last month.
And that’s the steepest drop in inflation in the current economic cycle – and one of the sharpest drops ever. At this rate, we will return to pre-pandemic inflation levels (below 3%) by May. And by June, we should hit the Fed’s 2% target.
Further, consumer prices rose just 0.1% month-over-month.
That, too, essentially marks the slowest monthly rise in consumer prices this cycle. It is also below the average monthly inflation rate in the years leading up to the pandemic.
Overall, today’s CPI report showed that inflation is collapsing about as quickly as it could be right now. It appears that inflation is dying.
Will that continue?
Inflation Is Dying Fast
That’s because the biggest component of inflation – Core Services, or services excluding energy services – hasn’t yet collapsed. But it is primed for a huge drop going into the summer.
Core Services includes multiple components, but its largest weighting by far is housing. Housing CPI has yet to drop. But due to the way it is calculated, housing CPI is actually a lagging indicator.
Rent and home prices have started to drop recently. This is best captured by Zillow’s Observed Rent Index, which shows that rent inflation has dropped from 17% a year ago to less than 7% today.
Historically, Core Services inflation tends to lag Zillow’s Observed Rent Index by about six months. According to that relationship, Core Services inflation – which has been steadily rising for the past several months, even as headline numbers dropped – should start topping out right about now.
Indeed, in today’s CPI report, we saw the Core Services inflation rate drop for the first time in this cycle, from 7.3% to 7.1%.
That number is going to drop even lower as we push into summer.
That’s important because Core Services account for about 60% of CPI. As Core Services finally crashes into the summer, headline inflation will keep crashing, likely even more than it currently is.
We lost 100 basis points on headline inflation in March. We will likely lose another 100 basis points or more in April, May, and June, bringing us all the way back to 2% inflation by the summer.
What does that mean for stocks? It’s rally time.
The Final Word
You don’t want to miss this historic opportunity, as the stock market is on the verge of a massive rally that could make you rich. How? Going back to the 1930s, every time that red-hot inflation turned into significant disinflation, stocks rallied in a major way. Every single time.
History is repeating right now. Inflation peaked in late 2022. And stocks have been pushing higher ever since.
This is not a coincidence. It’s a proven pattern. As this disinflation trend gains more momentum and we push closer to the Fed’s 2% target, this stock market rally will grow more powerful.
The S&P 500 is already up 15% since October. We think it’ll rally another 20%-plus into the end of the year.
But that’s nothing compared to the gains you could make in certain individual stocks, which could rally more than 100% into the end of 2023.
Especially one tiny stock that is at the forefront of a game-changing technology.
Specifically, the U.S. government is developing a top-secret technology that could transform the world as we know it. It’s a technology that many compare to the discovery of fire itself.
And this tiny company is developing the best form of this technology right now.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.