No stock picks today. I am surprised that futures are up right now?The inflation news just released almost guarantees another rate hike by the Federal Reserve:
- MarketWatch – Inflation climbs at fastest pace in 5 years, CPI shows
- ZeroHedge – Highest Rent Inflation Since 2007 Sends Core CPI Above Fed’s Target For 14th Consecutive Month
Normally equities can provide inflation protection for your portfolio, but I am not sure you can count on that during this Economic Cycle. I spent the morning doing an analysis of the ETF’s I follow – comparing their current Market Price to Fair Value:
| Name | Ticker | Price | Fair Value | Price/ Fair Value |
| Health Care | XLV | 70.56 | 76.17 | 93% |
| Consumer Discret | XLY | 84.1 | 87.7 | 96% |
| QQQ | QQQ | 122.8 | 124.56 | 99% |
| MSCI EAFE | EFA | 59.37 | 59.68 | 99% |
| Consumer Staples | XLP | 52.25 | 52.01 | 100% |
| S&P 500 | SPY | 226.29 | 224.04 | 101% |
| Technology | XLK | 49.47 | 48.95 | 101% |
| Financials | XLF | 22.98 | 22.45 | 102% |
| DJIA | DIA | 198.09 | 193.47 | 102% |
| Industrials | XLI | 62.73 | 60.18 | 104% |
| Utilities | XLU | 49.04 | 45.87 | 107% |
| Energy | XLE | 74.84 | 61.21 | 122% |
| Materials | XLB | 50.64 | 21.27 | 238% |
Not surprisingly – most sectors and indexes are trading near or above their Fair Value. Healthcare is a little beaten down, but still trading at 93% of Fair Value – so it is not a screaming buy – especially with headlines like this:
- FiercePharma – Trump’s latest pharma-fighting plan? Use Twitter to force prices down, manufacturing to U.S.
I don’t short stocks or ETF’s – but the Materials Sector is looking like a prime candidate for a trade to the downside – trading at 238% of Fair Value.
Bottom line – equities might not provide much downside protection if Inflation continues to increase.
Extra – can someone please, please, please get Trump off Twitter – the sooner the better for his Presidency.
- Business Insider – TRUMP TWEETS BACK AT NBC: Companies are adding US jobs ‘because of me!’
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