We wrote about US inflation topping out at a whopping 7.5 percent last week so we were curious about inflation with the U.S. top trading partners and the math came in at an average of 4.3 percent and trending up.
Inflation doesn’t live in isolation within a country so whether it’s avocado’s from Mexico for your guacamole or a new Samsung TV to watch that big football game the cost of everything is reflected in each country’s inflation and central bank rates.
The data clearly shows a continuation of inflation across all the top major trading partners although a few country’s central banks have already begun raising central bank rates to attempt to fight inflation however the net result is now a big currency carry trade phenomenon is occurring where Latin American currencies are being bought for their high central bank yields but that play seems to be tapering off. .
The Federal Reserve won’t raise rates until March but NOW is the time to prepare accordingly. If the Fed issues a surprise 50 basis point hike or higher then a market sell off will likely ensue. Our plan is to pick up small bites of our favorite defensive portfolio stocks along with some other stocks we’ve discovered over the past few months.
Stay tuned and stay solvent…