CPI Shows The REAL Inflation Trade

cpi shows inflation

Tomorrow will feature the most important economic report of all time. OF ALL TIME! At least, that’s how the media will treat it. Have you ever noticed that the latest economic report, the latest Federal Reserve meeting, or the latest earnings numbers are the most important thing ever? This is the state of the financial media. Unfortunately, many people use flashy graphics, bold music, and flat-out hyperbole just to get you to tune in. So, that’s why you’re going to hear a lot about the Consumer Price Index (CPI).

I agree that CPI isn’t essential. But, this inflation measure will tell us a lot about the state of the U.S. economy and give us clues on when the Fed might need to raise interest rates. But I want to do something much more important. I want to show you how to make money off rising inflation – or how to avoid getting sucked into a bad investment. Let’s discuss.

CPI Shows Inflation is on the Rise

The CPI will tell us how much “official” inflation has increased over the last 12 months (it will report May’s figures). So, for example, in April, the world froze after the U.S. government said that consumer prices increased by 4.2% that month compared to the same period in 2020.

Naturally, that core number doesn’t include food or energy costs. The government says that these costs are too volatile to include in the underlying figure. So, you’re supposed to ignore the fact that rising gasoline prices and food supply chain challenges are emptying your wallet.

CPI shows Inflation

Tomorrow, the CPI will likely show strong inflation levels compared to the same time last year. But we already know this. So, why get all ramped up. We want to make money instead… right? So, I did a lot of digging on how to play inflation.

I thought for a moment that oil and gas producers were the best option. But then I realized something. Gasoline is an inelastic product. So, when gasoline prices are rising, at the same time inflation is rising, someone has to be making a lot of money. And it turns out that those individuals are oil refineries.

I will dig deeper into this, but this makes for an interesting momentum play should oil prices rise, and the summer progresses. But I’ll have a list of companies for you next week that might make for interesting trades.

What Else is On Tap?

I made it back to Florida in one piece. I intentionally flew on different airlines to gauge consumer demand. Unfortunately, Southwest’s terminals in Ft. Myers and Baltimore were slammed.

Delta – in Atlanta – was crowded. I can’t say the same about my two flights from Baltimore and to Ft. Myers through the hub. I find this interesting because it speaks volumes about the different challenges that certain airlines will face.

We might see some very rangy estimates for airlines when their earnings reports approach for the second quarter. I think this is going to create some significant volatility in their options chains ahead of the reports. And that creates some very terrific opportunities for us looking out into the future.

I do not want to own any airline stocks right now – except for JetBlue Airways (NASDAQ:JBLU). And even then, JBLU is a momentum play with M&A speculation. But I can actively trade these companies. And I’ll show you how in the week ahead.

Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.
Garrett Baldwin
Garrett Baldwin
Garrett Baldwin joined Godesburg Financial Publishing as Chief U.S. Markets Analyst in early 2021. A Johns Hopkins-trained Economist, he’s worked with hedge funds, venture capital firms, angel investors, and economic advisors to the U.S. government. Baldwin specializes in market anomalies and alternative investments. He’s written extensively on momentum, value, insider buying, and other unique strategies that provide investors that elusive edge.

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