[Market Outlook] Up, Up, Up, But What Goes Up...

Up, Up, Up, But What Goes Up...

Last week saw a lot of assets and indicators go up yet again. This is a theme that the market will likely continue to grapple with for the next several weeks or months because we are in the midst of a battle between three very influential "ups". 1. Earnings 2. Inflation 3. Asset prices

There seems to be widespread agreement that these are all rising, and in the near-term, will continue to rise. Another uncontested relevant market moving trend that is going up is the number of consumers and workers reentering the economy. However, HOW the economy reopening will impact all of these ups is, in many trader's opinions, up for debate. As you'll read in this week's market highlights, there are several developments that suggest we should look out for some changes in what we should expect to continue to go up. Some will say this is bad. At MarketGauge, we'll treat it as an opportunity. After a year like no other, with restaurants closed, office buildings empty, amusement parks and theaters shut down, and few people driving to work as the "pandemic" caused most services and goods to be shuttered. Gas prices fell, hotels and airline flights were ridiculously inexpensive, and businesses suffered. Now the economy is reopening. Consumers are traveling and spending money at businesses that were previously restrained or closed. Economists will explain that this increased demand and consumption will lead to increased prices (inflation) and higher company earnings. In fact, as noted above, higher inflation with higher earnings is happening. Additionally, the Federal Reserve says they want to "heat up" the economy and welcome inflation exceeding 2-3%. So far, this is bullish. The markets react with higher equity prices reflecting higher earnings. The Elephant In The Room However, the elephant in the room is that equity markets also fear inflation in the same way that when camping in the woods, it's nice to have a campfire, but nobody wants a forest fire! Last week the monthly Consumer Price Index (CPI) numbers were reported, and the data was "as expected." As you can see by the chart below, the data doesn't appear to be anything abnormal which is typically what equity investors like to see. Click below to continue reading and for this week's charts and market highlights Click here for the Free Analysis Click here for the Premium Analysis Best wishes for your trading, Geoff Bysshe President MarketGauge

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