Inflation is collapsing right now.

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 Inflation is collapsing right now. 

Yesterday, we learned that in December, consumer prices fell month-over-month. They dropped 0.1% from November. Monthly drops in the consumer price index are exceptionally rare. They only happen about once every few years. But when they do, they always signal that inflation is dying. 

U.S. E- Commerce Sales. A chart showing revenue since 1999 shows upward growth in billions.

Sure, headline inflation rates in December were still 6.5% year-over-year. But that was a 70-basis-point slowdown from November’s inflation rate, which itself was a 60-basis-point slowdown from October’s inflation rate. At this rate of disinflation (60 to 70 basis points of disinflation per month), headline year-over-year inflation rates will drop to 2% by June!

U.S. E- Commerce Sales. A chart showing revenue since 1999 shows upward growth in billions.

Forget what you’re hearing on TV or reading in the paper. The data says inflation is crashing fast. That’s why stocks are soaring in 2023 – and why they’ll keep soaring for the next 12 months (at least). Stocks tend to soar in the 12 months after inflation peaks. Average returns going back to the 1920s? About 12%. And that includes The Great Depression and 2008 financial crisis – the only two times in history that stocks crashed after inflation peaked And we have neither condition present today. Excluding those, stocks tend to rally by about 20% in the 12 months after inflation peaks.

U.S. E- Commerce Sales. A chart showing revenue since 1999 shows upward growth in billions.

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