New Report | **WHEN** Inflation Pain will Peak (Stocks)

hey everyone we kevin here in this video

we're going to briefly go through a

report that might tell us when inflation

might actually begin to peak in

our global economy and so we've got to

talk about this report of course this

video is brought to you by titan which

we'll talk more about in a moment and of

course you can check them out via the

link down below so this report actually

comes to us from not the federal reserve

this time but the equivalent of the

federal reserve in england the bank of

england and this is the monetary policy

committee meeting that ended on february

2nd so yesterday and they give us

insights and so one of the first

insights that i think is really

interesting that applies to america is

that at the bank of england we saw a

five to four vote to raise rates and

this five to four vote wasn't

five people saying let's raise them for

saying no it was actually

five people saying let's raise rates a

quarter of a percent and four people

saying let's raise rates half of a

percent i think it's really important

that when we remember the federal

reserve is not a unanimous body it is a

committee that votes it is very

important to remember that we can

actually end up seeing some uncertainty

come into our markets when the federal

reserve starts acting like the supreme

court and we start seeing a little bit

more of a divide in how these votes land

because it could come down to a joe

manchin style vote as to whether or not

we get a quarter point hike or a half

point hike and i think that's going to

lead to some potential increased

uncertainty in the market for the short

term but in the long term we end up

getting some optimism out of this report

but let me get rid of some of the bad

first so one of the bad things that they

say in this report is they actually

believe that wholesale energy prices

aren't going to follow futures curves

down they actually believe that energy

prices are going to remain high for

longer and this is why they believe that

they need to be a little bit more

aggressive on dealing with inflation

specifically energy costs high

consumption by the united states

and the tight labor market with pay

going up like crazy now it's obvious

that every single company so far that

we're looking at their their earnings

reports on

are complaining

about inflationary pressures

and how not only do they have

inflationary pressures that they're

facing but how they have pricing power

amazon just raised amazon prime 20 bucks

uh gm says they have pricing power ford

says they have pricing power kimberly

clark says they have pricing power you

have uh out uh ralph lauren saying they

have pricing power you also had here

what was it vista outdoors read through

this earnings call pricing power almost

every single earnings report i've been

looking at pricing power pricing power

pricing power and this is really

important to consider because it's it's

telling central banks hey if every

company thinks they have pricing power

then we're probably going to see

inflation run a little bit hot for the

foreseeable future but the big question

is how long and that's what we're going

to talk about right now right after i

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look at this here inflation is expected

to increase further in the coming months

to close to six percent in february and

march this means the bank of england

actually expects inflation to hit a high

before we get any lower so if we're in

january right here we got february march

april may we kind of draw these out

right here

the bank of england is basically saying

we expect inflation to go up and up

through february and march to in you

know their their country six percent or

close to six percent in february and

march before peaking at seven and a

quarter percent in april let me draw

this line a little differently there we

go uh look at that seven point four

percent in the united kingdom in april

so they actually expect an inflation

peak in april they believe that the peak

is two percent higher than the peak they

expected they would hit from their

november report and they believe they're

really overshooting inflation

one of the reasons uh is uh well of

course not only wages and energy but

spending by the united states i'm going

to show you where that is and of course

bottlenecks and supply chain issues but

it's kind of interesting that they blame

the united states but a peak of 7.4 in

april kind of means we might start

seeing markets price in

somewhat of an inflection point to the

downside but i expect more pain first if

we get those high cpi reports in

february and march because i don't think

everybody's reading the bank of england

report but that's why you're here so we

could start identifying where do we

actually think these u-turns are going

to be most companies are reporting they

think they

there will be supply chain inflection

points in the second half of the year

but just because you have improved

supply doesn't necessarily mean that

prices start coming down unless consumer

demand starts waning which would be bad

if consumer demand started waning too

quickly because then we could actually

start getting some potential negative

cpi or i'm sorry negative gdp prints

which would be bad we don't want to go

in that direction

but the central bank here reaffirms that

they're going to

essentially print less money and they're

going to focus on raising rates so they

could deal with the inflation they're

facing now they believe that take a look

at this here's the line finally found it

strong demand for goods particularly in

the united states had appeared to have a

more important determinant of global

bottlenecks than supply chain

disruptions over recent months in other

words the bank of england is saying hey

don't just blame supply chain issues the

fact of the matter is people feel richer

and they're spending more money like

crazy and that is going to lead to this

continued inflationary pressure and

that's why we've got to start pushing

rates up uh in england just like what

we're expected to see in the united

states now in england they're seeing the

housing market slow a little bit which i

thought that was kind of interesting and

they also see some consumption

indicators coming in a little bit weaker

than production measures which they say

is very different from what you're

seeing in the united states where people

are still spending money like crazy in

fact they say price pressures were more

broadly based in the united states with

strong contributions from energy cars

accommodation

accommodations and other core goods in

other words people really willing to

just spend spend spent spend and we're

seeing that reiterated by company

earnings reports

also and they believe that global

bottlenecks are expected to ease over

the next 12 months especially as

spending in the united states rotates

back to services and away from some of

these these goods where people are

buying stuff remember kathy wood is

always telling us hey people are buying

stuff people are buying stuff uh but

they're going to be done buying stuff

because all their shelves are stocked

and then we're going to see on a sort of

an overrun or we're going to see

a like

shelf stock too full and then we're

going to see deflation because there's

too much stuff and i'd originally been

believing kathy wood's arguments but

every earnings call i read so far i'm

hearing that we're actually expecting

lower inventories amazon expecting lower

inventories gm lower inventories ford

lower inventories throughout 2022 ralph

lauren expecting lower inventories

throughout 2022 same thing with even

ammunition manufacturers or outdoor

sports manufacturers you name it

everybody's expecting lower inventory

through at least 2022 so probably too

early to really go down that sort of uh

you know deflationary rabbit hole from

overly built up supply chains and too

much inventory and it's sort of

reiterated here by the bank of england

though at some point if we get this

shift to services and that demand shifts

away well that demand shifts away from

good goods and we get uh companies

catching up then maybe we'll get that

deflationary impact but possibly not

until well into 2023

they also mention that at least in the

medium term which is usually the next 12

to 18 months they see inflation

compensation measures increasing

slightly they see that according to data

they're collecting from cpi expectations

and intelligence that higher inflation

expert expectations have come in at

above average levels and this is really

encouraging them to raise rates sooner

rather than later they're seeing

consumption rise they're also seeing the

uh savings ratio start to fall a little

bit so eventually when people run out of

money maybe we'll start seeing a

slowdown of those inflationary pressures

then we had a little note over here that

the number of companies reporting

skilled labor shortages as a constraint

on output in january had remained very

elevated we're seeing exactly the same

thing in the united states

and they expect only a slow improvement

of supply chains throughout 2022

and some are even judging that we could

see the problems going to 2023. so even

though

they're calling for a peak of inflation

all the way through

uh april it's entirely possible that

we're still going to have issues with a

lack of inventory whilst not seeing

supply people spending money like crazy

uh and keeping again inventory low and

pressures on supply chains throughout

all of 2022 so 2022 is going to be a

really interesting year uh in the united

kingdom they say that price increases

have been particularly acute for

secondhand cars and hospitality

replicating trends in the united states

they are talking about uh potentially

implementing utility price caps which

price ceilings were what led to the

disaster of the 1970s in the united

states so i don't really support that

price ceilings generally lead to like a

genie bottled up and then you shake them

or whatever and it's like ready to

explode probably coke bottle is a better

analogy there but whatever

they do believe that global activity is

going to continue to grow but ultimately

energy prices and supply constraints are

going to kind of hold us back a little

bit so something to keep in mind and

they do think that export prices are

expected to rise a bit further more in

the near term and this is kind of the

reiteration of what we're seeing here

they're expecting things to get a little

bit worse for the next couple months and

then they think things are going to get

better

see they believe that consumption was

expected to slow as households cut back

on spending in the face of global energy

prices and good prices going up

and that that because of this slowing

maybe they don't have to raise rates as

highly but this is particularly

happening in the united kingdom and they

make this contrast to the united states

we're in the united states we're still

seeing those higher levels of spending

and remember their rates are actually

set higher than ours right now they also

mention

that

if if we continue to have high inflation

expectations by not raising rates then

we could end up anchoring inflation

expectations to levels that would merit

more rate increases but right now we're

seeing inflation expectations somewhat

stable which you can usually see those

by looking up like the five-year break

even on treasuries and then you end up

seeing oh okay well inflation

expectations haven't really been growing

in the united states they haven't really

been growing in europe inflation

expectations have been relatively stable

now it's just a matter of getting

through the drama of having some ugly

potential reports potential hopefully

not but some ugly potential reports in

february and march

uh and then maybe even a peak report in

april and then hopefully this is when we

hit a peak fear moment and it's time to

go all in on the market again who knows

we'll see but this is a really

insightful report and it reiterates a

lot of what i'm reading in earnings

calls so stay tuned for more insight

from earnings calls make sure to

subscribe check out titan via the link

down below folks thank you so much for

watching and we'll see you next time

thanks