The Rising Fear Of Stagflation

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In his Daily Market Notes report to investors, while commenting on the fear of stagflation, Louis Navellier wrote:

Rising Fear Of Stagflation

Interest rates are spiking this morning. 

Commodity inflation, punctuated by $6 gasoline, is spiking interest rates and raising fears of stagflation, even concerns of an eventual recession. This is even more pronounced in Europe than in the US. The 2-year yield is up to 2.24, up from only 0.13 a year ago.  The 10-year yield is 2.45%, up 11 basis points on the day.

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Mortgage rates are well past 4% and on top of rising prices, a home buyer is looking at a monthly payment 20% higher for the same house than a year ago. Homebuilder stocks are understandably being downgraded.

There is no apparent resolution to the Ukrainian situation on the table yet which is forcing more adjustments to the impact of sanctions on Russia, in particular energy, as crude remains above $110, and natural gas is back to its October high.

Investor Bias

Marijuana stocks jumped today on new legislation to legalize it nationally.

Investor bias remains toward larger safer stocks with the biggest, Apple (NASDAQ:AAPL) on a 15% run-up off the recent bottom and the Dow more stable than indexes with smaller companies.

Pricing Power

The focus going forward will be with companies demonstrating pricing power in the next round of earnings as inflation and resulting higher interest rates will remain the biggest concern.

Companies in the commodity and food-related businesses should be best positioned, as well as the energy complex at current crude prices which also supports electric vehicle-related names; Tesla is up $300 from the recent bottom to $1,000.

Coffee Beans

Even if Russia was to succeed in its goal to occupy Ukraine, the country's track record as an occupier is calling into question its ability to hold on to its much smaller neighbor. Russia's failure of the occupation of Afghanistan in 1992 has even been called a "textbook study of how a major power can fail to win a war against guerrillas." The Russians’ use of brute force - also called the iron fist approach - is believed to be a deciding factor of why the country's forces failed repeatedly against insurgents. Source: Statista. See the full story here.