Retail sales disappointed after the spectacular April rise. U.S. futures rose as a drop in commodity prices gave some relief to inflation-fearing investors. Crypto markets rebound on Musk’s cryptic tweet.
Census bureau released retail sales data for March which stood at a dissapointing 0.0%. Economists expected retail sales to grow by 1%, after the spectacular 9.8% jump in April.
Even worse, retail sales excluding car sales were at -0.8%, as opposed to the expected 0.8%. Retail sales ex auto and gas were at -0.8%, vs expected 0.3%.
Car and gas prices the main drivers of the recent CPI spike. This shows that if you print money for long enough, you don’t need large spikes in demand to drive prices up.
Dissapointing retail sales data comes as investors are becoming more sensitive to inflation fears.
Lower Prices Relieve Stocks
The surge in commodity prices subsided on Friday, with iron ore dropping below $200 a ton, after trading as high as $233 just this week. Copper and aluminum also dropped.
S&P 500 futures and Stoxx Europe 600 rose 0.6%. Emerging markets rose 0.7%, while the MSCI Asia Pacific Index jumped as high as 1.2%.
The effect of commodity prices on stocks has demonstrated that investors are becoming more and more sensitive to inflation fears. Few believe that the Fed can effectively control inflation.
Crypto Rollercoaster
Some see crypto as a hedge against inflation. but crypto is volatile enough on its own, especially when Elon Musk gets involved.
After a shocking announcement that Tesla would no longer accept Bitcoin as payment for its vehicles, which caused the entire crypto market to drop by 10%, Musk has published a cryptic tweet about Dogecoin.
Musk claimed that he is working with the developers of Dogecoin to “improve transaction efficiency.” The tweet caused Dogecoin to revere its losses, reaching $0.68. Bitcoin recouped some of its losses as well, trading above $50,000.
The market cap of Dogecoin spiked $10 billion after this tweet. pic.twitter.com/cqMA1irxSm
— TradingView (@tradingview) May 13, 2021
Many have questioned the veracity of Musk’s claims, as the Dogecoin developer updates have almost come to a halt since 2017.
Stocks To Hedge Against Inflation
Commodity prices, PPI, CPI have all increased recently, as the Fed’s easy money is finally making its way to the consumer. The labor shortage will contribute to rising prices as well.
In that environment, “value stocks” will become more attractive to investors. Investors will look at stocks with lower valuations and slower growth, but with robust earnings. These stocks will do better in an inflationary environment.
Value investors like Warren Buffett might finally get their
Dollar Slumps, Oil And Gold Jump
Oil has reversed some of its Tuesday’s losses. Brent crude and West Texas Intermediate crude jumped 1.3%.
Treasury yields dropped to 1.63% on news of lower commodity prices. However, the Dollar Spot Index fell 0.2% and gold strengthened 0.5% to $1,836.04 an ounce.
