Following this morning’s soft August Consumer Price Index (CPI) report, a golden “buying window” has opened in stocks. But it may not stay open for long, so if you want to capitalize, time is of the essence.
Despite the markets being up about 15% year-to-date, stocks have been stuck in neutral for the past two months. Indeed, the market achieved those gains in the time leading up to July 4th. And since then, stocks have gone essentially nowhere.
More than 60 days later – zero upward progress. It’s been a frustrating market, to say the least.
But we believe that’s all about to change.
August’s CPI report showed that the U.S. economy’s overall inflation rate dropped to 2.5%. On a three-month annualized basis, the inflation rate was just 2.1%. Excluding shelter costs, it fell all the way to 1.1%.
Now, that bears repeating. Excluding the cost of housing, the U.S. inflation rate dropped to 1.1% in August.
The inflation problem that has plagued the U.S. economy for the past two years is finally over.
And that means that the Federal Reserve can now come to the stock market’s rescue.
Soft CPI + Flat Stocks + Rate Cuts = Market Rally
You see; the Fed controls the U.S. money supply, which is a huge input for the stock market. And for the past two years, the Fed has been tightening the money supply, subsequently hindering stocks.
We’re confident that things will reverse course next Wednesday.
It’s widely expected that at that time – when the central bank next meets – it will cut rates for the first time since COVID-19’s emergence. And after today’s soft inflation report, rate cuts next week are all but guaranteed.
This upcoming September cut will likely be the first in a series of rate cuts that continue into summer 2025. In fact, we think the Fed could cut rates as many as 10 times over the next year.
Collectively, those 10 cuts will help to reinvigorate the economy.
Mortgage rates will crash, reenergizing sidelined homebuying demand and unfreezing the housing market.
Auto financing rates will plummet as well, reheating the stalled-out auto market.
Debt costs will fall, prompting more individuals and institutions to borrow and spend money.
In other words, it seems the economy is about to bounce back in a big way. As it does, the markets should, too.
After all, the last three times the Fed cut rates under similar circumstances – strong and positive GDP, low unemployment, hardy consumer spending – were in 2019, 1998, and 1995. All three times, stocks rallied double digits in the six months afterward.
That’s why we believe a golden buying window has opened between now and next Wednesday’s first rate cut.
The Final Word
Stocks have been stuck in neutral for the past two months. We think they’re about to wake up in a big way. And if we’re right, a lot of money could be made in the markets.
To help you capitalize on this golden opportunity, I’m hosting an emergency strategy session tonight, Wednesday, Sept. 11, at 8 p.m. EST.
In it, I’ll discuss why I think these coming rate cuts could unlock a huge new bull market in stocks… why some stocks will rally more than others, thanks to underlying market dynamics… and what strategy I believe is best to help us find winning stocks in this new bull market.
Sign up for that strategy session now and get equipped for a major rally.
See you tonight!
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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