September inflation numbers and savers see silver lining for rate hike

TL;DR

• Inflation figures for September have been released and prices rose by 0.4% for the month

• This brings the annual rate down slightly to 8.2% from 8.3% in August

• Rates should continue to rise, but that means savings accounts are starting to pay interest again

• Top weekly and monthly trades

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Major events that may affect your portfolio

The latest inflation figures were released on Friday and it is clear that the Fed’s tough stance on raising rates has not yet been enough to drive prices down. The CPI rose 0.4% for the month of September, bringing the annual inflation rate down to (barely) 8.2% from 8.3% last month.

That’s below the dizzying highs of 9.1% we saw in June, but it’s coming down at a freezing pace.

It is aggravated by the fact that wages are not increasing at the same rate. Despite a buoyant labor market with surprisingly low levels of unemployment, real wages are down -3% compared to the same period last year. That figure was released this week in a separate statement from the U.S. Bureau of Labor Statistics.

Not only have average earnings declined in real terms over the past year, but the average number of hours worked has also declined. This means that, overall, real average weekly earnings have declined by 3.8% over the past 12 months.

Nevertheless, it should be emphasized that the inflation rate is heading in the right direction. It is now the third consecutive month we have seen a reduction in the annual inflation rate and this trend should continue given the Fed’s interest rate plan.

The stock market was all over the back of the news. The S&P 500 was initially down more than 2%, before performing a complete reversal to end the day up 2.6%.

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As a result of all this, further rate hikes by the Fed are virtually guaranteed. The next meeting in early November should result in a base rate increase of at least 0.75 percentage points, with a full percentage point hike not out of the question.

This continues to be a challenge for areas such as the housing sector, with the average 30-year mortgage rate an astonishing 7.08%. In July of last year, the same mortgage could be taken out at an average rate of 2.78%. Ouch.

Again, it’s not all bad news. Savers are discovering for the first time in a very long time that savings accounts actually pay some level of interest. Now, due to the high level of inflation, these still offer negative real returns. But stay.

We are even seeing new players coming to the savings game and it’s not just banks. Apple announced plans to allow iPhone users to deposit funds and credit card rewards into a new interest-bearing account. As with their other financial products, the Apple account will be operated through their partnership with Goldman Sachs.

So far, we don’t have any details on the interest rate to pay, but this is another example of Apple’s expansion into financial services. Apple Pay is becoming ubiquitous, they’re offering their own credit card, and they’re set to launch point-of-sale functionality for iPhones and their “buy now, pay later” program in the coming months.

This week’s flagship theme from Q.ai

We are unlikely to stop talking about inflation anytime soon, as it does not look like it will return to normal anytime soon. That means there’s still plenty of time to assess the impact on your wallet and take steps to protect yourself against it.

Gold and other precious metals have a history that dates back thousands of years with their use as a store of wealth, currency and protection against rising prices. As early as the ancient Incas and Egyptians, gold was a commodity considered valuable globally. It’s a serious record.

Despite our iPhones, electric cars, social media platforms and reality TV shows, we still value gold today, just as we did in the days of ancient Rome.

So while it may no longer be the only class of investment, it is still a major player and an alternative asset that many investors should consider. Not only is gold worth checking out, but other precious metals like silver, platinum, and palladium are as well.

But investing in an alternative asset class like this can be daunting. That’s why we created the Precious Metals Kit. We use AI to predict expected risk-adjusted returns over the coming week for gold, silver, platinum and palladium, then balance the kit between these metals by investing in commodity ETFs relevant.

It’s a great way to be exposed to gold and other precious metals, without needing to install a fireproof safe in your basement.

Best Business Ideas

Here are some of the best ideas our AI systems recommend for the week and month ahead.

QuidelOrtho Corp (QDEL) – The diagnostic healthcare company with probably the worst name in its industry is one of our Best buys for next week with an A grade in quality value, techniques and growth. Revenues increased 50.4% in the 12 months to July.

Aeglea Biotherapeutics (AGLE) – The biotechnology company is one of our Next Week’s Top Shorts with our AI assigning them a C in Technical, Low Momentum Volatility and Quality Value. Earnings per share are down -14.34% over the last 12 months.

Graftech International (EAF) – The industrial manufacturer is one of our Next month’s best buys with an A rating in our quality value factor. Gross profit is up 48.2% in the 12 months to the end of June.

Freshpet (FRPT) – The pet food business is one of our Next month’s best shorts with our AI assigning them an F in quality value and a D in low momentum volatility. Earnings per share are down -54.76% over the last 12 months.

Our AIs Next month’s top ETF trades is to invest in Argentine stocks, North American natural resources and energy stocks, and to short the bond market. Best Buys are the Global X MSCI Argentina ETF, the iShares North American Natural Resources ETF and the iShares US Energy ETF. Top Shorts are the iShares Floating Rate Bond ETF and the Vanguard Short-Term Bond ETF.

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