Overall, the December inflation numbers came in near expectations. Annually, consumer prices are up 7.0%, while energy is seeing the fastest rise with gasoline rising 49.6% in the past 12-months.
Below are the headline numbers from today’s report:
In the snippet below, note the 49.6% year-over-year increases in Gasoline and 41% in Fuel oil. The 37.3% rise in used vehicle prices is also worth pondering.
Source: https://www.bls.gov/ces/
The Fed can manipulate interest rates, but they can’t produce one drop of oil. To that point, energy and oil markets are beyond their control. Are spiking oil prices telling the Fed to raise rates? I think they are.
Energy makes up a large part of household budgets. With energy prices up 29.3% (year-over-year), that is a huge problem for anyone barely getting by. Add in the expiring child tax credit and it won’t be long before people start missing payments.
Millions of American families received their final enhanced child tax credit on December 15, 2021. They will soon be looking for alternative ways to pay higher rent and energy bills. Some will dip into savings and retirement funds, while others will use credit cards or default. Either way, it will take more liquidity out of the system. Our work supports a 20% to 30% decline in the S&P 500 sometime for 2022.
GOLD 1-HOUR FUTURES CHART: Gold futures are rising after today’s inflation report. Near-term, resistance arrives between $1825 and $1835. A strong move above $1835 through $1840 would be near-term bullish. Whereas a bearish reversal would be considered on a daily close below $1815.
AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle that will begin to unravel in 2020.