SpyMasterTrades on Nostr: Severe stagflation will likely occur in the U.S. throughout the mid-to-latter part of ...
Severe stagflation will likely occur in the U.S. throughout the mid-to-latter part of this decade (and is likely to begin by the end of 2024).
This is a 6-month candlestick chart of the S&P GSCI (#SPGSCI) against the U.S. money supply (#M2SL). The S&P GSCI serves as a measure of commodity performance over time. When comparing it against the broad money supply, we can ascertain whether commodities are taking up an increasing or decreasing amount of money in the economy. This analysis, in turn, allows us to assess changes in the amount of purchasing power needed to buy commodities and downstream goods. When this ratio rises, PPI and CPI subsequently rise.
Currently, this ratio has formed a virtually perfect log-scale, golden ratio bull flag. Such a structure indicates a high chance that the ratio will break out. (I've highlighted the bull flag structure and its potential breakout track with a line and arrow in the chart). If a breakout successfully occurs, this ratio is likely to top out in the mid-to-late 2020s somewhere near the +3 standard deviation.
What makes the current situation so anomalous is that this bull flag structure has coincided with a deep yield curve inversion. As you may already know, a yield curve inversion is a reliable recession indicator. The NY Fed uses the 10y/3m yield curve inversion as a recession predictor. Over the past year, this signal has been blaring to the highest levels in over 40 years. A recession is overwhelmingly likely to begin in the U.S. by the end of 2024.
If a recession occurs while commodity prices are increasing against the money supply (as the money supply itself is increasing), this scenario will result in stagflation. Since this chart is a higher timeframe, log-scale chart, a breakout is likely to reflect strong and long-lasting inflation. In essence, this chart is a warning that severe stagflation is likely coming.
#Recession / #Stagflation / #Economy / #Finance / #Markets
This is a 6-month candlestick chart of the S&P GSCI (#SPGSCI) against the U.S. money supply (#M2SL). The S&P GSCI serves as a measure of commodity performance over time. When comparing it against the broad money supply, we can ascertain whether commodities are taking up an increasing or decreasing amount of money in the economy. This analysis, in turn, allows us to assess changes in the amount of purchasing power needed to buy commodities and downstream goods. When this ratio rises, PPI and CPI subsequently rise.
Currently, this ratio has formed a virtually perfect log-scale, golden ratio bull flag. Such a structure indicates a high chance that the ratio will break out. (I've highlighted the bull flag structure and its potential breakout track with a line and arrow in the chart). If a breakout successfully occurs, this ratio is likely to top out in the mid-to-late 2020s somewhere near the +3 standard deviation.
What makes the current situation so anomalous is that this bull flag structure has coincided with a deep yield curve inversion. As you may already know, a yield curve inversion is a reliable recession indicator. The NY Fed uses the 10y/3m yield curve inversion as a recession predictor. Over the past year, this signal has been blaring to the highest levels in over 40 years. A recession is overwhelmingly likely to begin in the U.S. by the end of 2024.
If a recession occurs while commodity prices are increasing against the money supply (as the money supply itself is increasing), this scenario will result in stagflation. Since this chart is a higher timeframe, log-scale chart, a breakout is likely to reflect strong and long-lasting inflation. In essence, this chart is a warning that severe stagflation is likely coming.
#Recession / #Stagflation / #Economy / #Finance / #Markets