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Market Signaling a Curb in Inflation Fears, Tech Companies are “Right Sizing”, The Supply/Demand “Bullwhip”

·2 min read

This article was originally published on ETFTrends.com.

By Denis Rezendes, CFA, Partner, Portfolio Manager

The U.S. Dollar is surging to new 20-year highs. Market measures of long-term inflation expectations continue to fall, driven in part by falling energy and agriculture prices. Gas prices are driven by the price of oil and refining spreads, both have recently fallen. As the economy slows, the pace of hiring is expected to slow as well. Layoffs have already begun at technology companies. Don’t expect any relief from the Federal Reserve unless earnings begin to fall. Without cheap Russian gas, the German economy's dominance in Europe is in question. Understanding the ‘Bullwhip Effect.’

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1. Good news for U.S. consumers, and bad news for U.S. manufacturers:

Source: The Daily Shot from 7/6/22

2. Markets have shaken off fears of elevated long inflation over the long-term:

Source: The Daily Shot from 7/5/22

3. The Agricultural Subindex is back to pre-Ukraine War levels:

Source: The Daily Shot from 7/6/22

4. Consumers may finally get some relief at the pump:

Source: The Daily Shot from 7/6/22

5. Slowing payroll growth is normal at a 3.6% unemployment rate, but to enter a true recession employment will need to decline:

Source: Oxford Economics

6. Without access to cheap external funding many tech companies will have to right size their workforce:

Source: TrueUp

7. The Federal Reserve reacts to economic fundaments, not changes in earnings multiples:

Source: Piper Sandler 

8. Germany’s high trade balance, which created problems for other European countries, is now completely gone:

Source: The Daily Shot from 7/4/22

9. Sudden changes in demand reverberate throughout the supply chain as each participant has trouble correctly forecasting future supply and demand needs:

Source: Longview Economics

Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.

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