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BEING SMART IS EASY.


G-101 SPM AI our proprietary algorithm posted on March 15, 2023, “The S&P 500 [index] at 3,819.93 represents the best opportunity to commit 90% of your net cash reserves into the stock market. G-101 [SPM AI] has printed the best SPM tag in 18 months (about 1 and a half years) at +SPM 89.40 and predicts the prior all time of 4,796.56 (01.02.2022) will be surpassed this year.”


The S&P 500 index closed on July 28,2023 at 4,582.23, a mere 214,33 points away from its all-time high. What it meant to the followers of the G-101 algorithm was a return of 109.21% from March 15, 2023, to July 28, 2023, and more to come. Go to https://stocktwits.com/G101SPM and check the over 250 individual trades to support the statement. Not one investment services firm can compete with the accuracy of our algorithm in predicting the direction of the S& P 500 index and the ideas of what stock investments to be made, whether long or short. The next question you may ask: What does the S&P 500 Index have to do with picking stocks? The G-101 SPM A1 algorithm is based on the performance of the index. The key advantage of using the S&P 500 as our benchmark is the wide market breadth of the large-cap companies included in the index. Also, the index provides a broad view of the economic health of the U.S. because it covers so many companies in so many different sectors. By focusing on these components our 171-level algorithm, has a reliable benchmark to build to the continuous flow of data.



Moreover, the G-101 algorithm places “value tags” on economic and social issues based on the effects they may have on intangible assets that stocks are. Within the value tags is market sentiment – the psychology of market participants, individually and collectively; subjective, biased and obstinate. The last element is inflation --- the valuation multiple and huge driver from a technical perspective.

For example: On March 15, 2023, we also posted: “The probability of a ‘soft landing’ produced a SPM tag of SPM 86.12 (86.12% likelihood) which reduced the risk of stocks declining.”

note: Each value has an SPM tag, weighted to the degree of their importance to the underlying formula.


Be as it may, “inflation” holds the maximum weight.

INFLATION – the SPM factor.

The S&P 500 is up more than 19 percent this year, but some still warn that less inflation may not be as rosy as that implies. Beaten as they might be by the stock market’s rally, worriers on Wall Street still question how long it can last. Their numbers are shrinking, though. After starting the year with dour warnings about the economy, many investors and analysts have changed their minds. This newfound bullishness is grounded in signs that inflation is slowing, and the economy is still standing strong, as well as a belief that corporate profits are set to grow now that interest rates have reached their peak or are at least very close to it.

Reserve will succeed in its effort to bring inflation under control without causing a recession. But recent economic data — including two reports released Friday — have looked more positive than even optimists had dared to hope a few months ago. Data from the Commerce Department on Friday showed that inflation continued to cool in June, even as consumer spending rose — signs that the economy retains substantial momentum 16 months into the Fed’s campaign to slow it down. Separate data from the Labor Department showed that wage growth slowed in the spring — an encouraging sign for policymakers who have been worried that rapid pay increases could feed into inflation. Fed officials have been raising interest rates for more than a year in an effort to wrest inflation under control. The data on Friday was the latest evidence that it is finally coming down meaningfully — and so far without a slump in demand that risks derailing the broader recovery or leading to widespread job losses.

“There’s a lot of encouraging data — you’ve got wages softening, you’ve got realized inflation softening,” said Omair Sharif, founder of Inflation Insights. “This is kind of the leading edge of the softness that the Fed wants to see.” Other recent data have also pointed to the recovery’s resilience. Overall economic growth picked up unexpectedly in the second quarter, lifted by a surge in factory construction. Orders for durable goods, a measure of business investment, rose in June. And applications for unemployment insurance have fallen in recent weeks, suggesting layoffs remain low.

Inflation F.A.Q.

What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.

Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains can lead to higher wages and job growth.

How does inflation affect the poor? Inflation can be especially hard to shoulder for poor households because they spend a bigger chunk of their budgets on necessities like food, housing and gas.

Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.


THE STEADY OF GOOD NEWS has combined with less painful price increases at the gas pump and in the grocery aisle to lift the spirits of consumers, who have long been dour despite the low unemployment rate. Consumer sentiment, as measured by the University of Michigan’s long-running survey, rose 11 percent in July, to its highest level since October 2021. The combination of slowing inflation and solid economic data is also stoking a growing sense of optimism among economists, many of whom once considered a recession all but inevitable. The Fed’s staff even revised its forecast at the central bank’s meeting this week and is no longer calling for a downturn this year. “It certainly supports the view that we’re in the midst of a soft landing,” said Kathy Bostjancic, chief economist for Nationwide Mutual, said of Friday’s data.

Still, inflation remains well above the Fed’s target of 2 percent annual price increases, and many economists, including Ms. Bostjancic, remain skeptical that it will cool completely without unemployment rising. As long as the job market remains strong and consumers keep spending, wages and prices are likely to keep rising. “Certainly the odds have gone up for a soft landing — but we’re still hesitant to declare that a recession is not in the cards,” Ms. Bostjancic said. Policymakers, too, remain watchful, because the same resilience that is driving optimism now could lay the groundwork for stubborn inflation later. If companies can continue to raise prices because their customers are in good financial shape and are able and willing to pay more without pulling back, it could keep inflation uncomfortably rapid. “The overall resilience of the economy — the fact that we’ve been able to achieve disinflation so far” — is “a good thing,” Jerome H. Powell, the Fed chair, said at a news conference this week. Still, “at the margin, stronger growth could lead, over time, to higher inflation, and that would require an appropriate response from monetary policy.”

Policymakers lifted rates to a range of 5.25 to 5.5 percent this week, the highest level since 2001, and signaled that they were open to doing more if incoming data suggested that inflation was likely to last.

The data released Friday showed that the Fed’s preferred measure of inflation, the Personal Consumption Expenditures index, climbed 3 percent in the year through June, the Commerce Department said. That was down from 3.8 percent the month before and from a peak of 7 percent a year earlier.

After stripping out food and fuel — both of which jump around — a core inflation index climbed by 4.1 percent, slightly less than economists had expected. That is down notably from a peak of 5.4 percent in 2022, and it is the lowest reading since September 2021. Much of the recent disinflation has come as unusual shifts that took place during and after the pandemic have slowly faded. Supply chain disruptions have healed, allowing a pop in the price of goods like furniture to disappear. And after plummeting at the start of the pandemic and then surging back, airfares and hotel prices have been either declining or growing at a more normal pace, which is also helping inflation to cool.

Fed policy is also playing a role. Demand for cars and houses has pulled back amid higher interest rates, which is probably helping prices for vehicles and housing-related products — from rent to washing machines — to moderate. And gas prices have cooled in recent months, which has helped to lower overall inflation. But gas is a cautionary tale that underscores why economists remain cautious and hesitant to declare victory: Prices have risen in recent days amid a major refinery shutdown, a trend that could slow future disinflation if it persists into August.

Still, other signals point in the right direction for the Fed. Compensation costs, including both pay and benefits, rose 1 percent in the second quarter, the Labor Department data showed, down from 1.2 percent in the first three months of the year. Compensation was up 4.5 percent from a year earlier, the slowest growth in more than a year. And while wage growth has softened, inflation has fallen by even more. Workers are better off as a result: Pay, adjusted for inflation, rose in the second quarter for the first time in two years. “Households are getting back some purchasing power,” said Beth Ann Bovino, chief economist for U.S. Bank.

The slowdown in wage growth has surprised some economists because the unemployment rate remains very low, which would ordinarily put pressure on companies to raise pay to attract and retain workers.

But other evidence suggests that the labor market has softened even without a big increase in joblessness. Employers are posting fewer job openings, adding fewer new jobs and poaching fewer employees from competitors, all signs that demand for workers has slowed. At the same time, the supply of workers has increased, as immigration has picked up and more people are coming off the sidelines to join the labor force. Employers in recent months have reported having an easier time finding workers. In a survey of businesses released this week by the National Association for Business Economics, a majority of respondents said wages at their firms were unchanged in the second quarter — the first time that has happened since 2021.

“Labor’s still a problem, the labor market’s still tight out there, but firms are starting to figure out how to make do with what they have,” Lester Jones, chief economist for the National Beer Wholesalers Association, said in a conference call held to discuss the survey.

He added, “We see firms just being smarter with the employees that they have and just trying to be more efficient and not trying to chase employees the way we did coming out of Covid.”


THE FED IS GIVING A FREE RIDE

The Fed’s forecasts from June point to interest rates easing to 4.6 percent by the end of 2024, but investors are betting they will drop even lower over the same period, to 4.2 percent. The Fed’s forecasts have been wrong before, but so have the market’s. It’s also possible that interest rates will remain higher than either expect, because inflation, while slowing, remains far from the Fed’s goal of 2 percent. Mr. Powell reiterated this week that the central bank was committed to that target, achieved by slowing the economy through higher rates. Higher stock prices have made the Fed’s job harder, enriching investors and leaving companies and consumers with access to more money, fueling spending. That undercuts efforts to ease inflation. These financial conditions are likely to need to change, either naturally as student loan payments restart in the fall and savings dwindle, forcing households to tighten their purse strings, or more forcefully, with the Fed raising rates even higher. Either would be bad for companies and stock prices. Mr. Powell appeared to suggest as much this week, noting that financial conditions had become detached from the Fed’s policy but that eventually the two would most likely come back together.

“Ultimately, over time we get where we need to go,” Mr. Powell said. That could spell trouble for the stock market, some analysts said.

Brad Bernstein, a financial adviser at UBS Wealth Management, said he thought the market, at this point, was largely ignoring the Fed’s forecasts. The Fed’s “ability to predict six to 12 months from now is as good or bad as my kids predicting what the Fed will do in six to 12 months,” he said. Business executives, on the other hand, continue to show caution about the future, judging by a variety of confidence surveys tracked by investors. “The question is, if the unemployment rate stays low and asset prices remain high, is it going to reignite inflation and will the Fed need to come back and do more?” Mr. Johnston said. “We just don’t know, but I think that is a looming risk.”

On Thursday, investors saw a glimpse of what could happen should rates rise further.

Better-than-expected economic data, combined with a report that Japan’s central bank may relax its policy of keeping its own government’s bond yields low, sparked a rapid increase in benchmark borrowing costs around the world — jolting traders across financial markets. The Bank of Japan then said on Friday that it would take steps to let bond yields edge higher.iday, the S&P 500 rallied again — climbing 1 percent and locking in its third consecutive weekly gain — after a second inflation measure for June showed price increases slowing while consumer spending continued to rise.

The stock rally has broadened from the handful of mammoth tech companies that had an outsize impact on the market earlier this year to a set of businesses including smaller companies and those more susceptible to the ups and downs of the economy.

Roughly half the companies in the S&P 500 have reported earnings for the three months through June. So far, the index has reported slight earnings growth, bucking expectations of a 7 percent contraction — although many of the companies expected to post a sharp decline have not yet reported.

“The economy is doing better than expected, and earnings are doing better than expected,” Mr. Bernstein said. “Ultimately, that’s all that matters.”


IN CONCLUSION ….

So now you have it:

G-101 SPM AI our proprietary algorithm, is the REAL DEAL --- a means to be ahead of the market and your money safer. Follow our SPM tags and be a better investor.

Any questions --- just ask.

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