September Inflation Figures And Savers See Silver Lining For Rising Rates

TL;DR

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

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

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

• Top weekly and monthly trades

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Major events that could affect your portfolio

The latest inflation figures were released Friday and it’s clear that the Fed’s hard stance on hiking rates hasn’t yet been enough to bring down prices. CPI was up 0.4% for the month of September which brings the annual rate of inflation down (barely) to 8.2% from 8.3% last month.

This is below the heady heights of 9.1% we saw back in June, but it’s coming down at a glacial pace.

It’s compounded by the fact that wages aren’t rising at the same rate. Despite a strong labor market with surprisingly low levels of unemployment, real wages are down -3% compared to this time last year. This figure was released in a separate statement by the U.S. Bureau of Labor Statistics this week.

Not only have average earnings decreased in real terms over the past year, but so have the average hours being worked. It means that overall, real average weekly earnings are down 3.8% over the last 12 months.

Still, it’s worth highlighting that the inflation rate is heading in the right direction. This is now the third consecutive month we’ve seen a reduction in the annual rate of inflation and this trend can be expected to continue given the Fed’s plan for interest rates.

The stock market was all over the place off the back of the news. The S&P 500 was initially down over 2%, before conducting a full reversal to finish the day up a whopping 2.6%.

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As a result of all this, further rate hikes by the Fed are all but guaranteed. The next meeting in early November is expected to result in an increase in the base rate of at least 0.75 percentage points, with a rise of a full percentage point 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 last year the same mortgage could be had at an average rate of 2.78%. Ouch.

Again, it’s not all bad news though. Savers are finding for the first time in a very long time, that savings accounts are actually paying some level of interest. Now because of how high inflation is, these are still offering negative real returns. But still.

We’re even seeing new players arrive to the savings game and they’re not just banks. Apple has 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 be paid, but it’s another example of Apple’s expansion into the financial services arena. Apple Pay is becoming ubiquitous, they offer their own credit card and they are set to release point of sale functionality for iPhones and their ‘buy now, pay later’ program in the coming months.

This week’s top theme from Q.ai

We’re not likely to stop talking about inflation anytime soon because it doesn’t look like it’s going to be back to normal anytime soon. That means there’s still plenty of time to consider the impact of it on your portfolio and take steps to protect against it.

Gold and other precious metals have a history that goes back thousands of years with their use as a store of wealth, a currency and a hedge against rising prices. As far back as the ancient Incas and Egyptians, gold was a commodity that was considered valuable on a global scale. That’s a serious track record.

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

So while it might not be the only investment class any more, it’s still a major player and is an alternative asset that many investors should consider. Not only is gold worth a look, but so are other precious metals such as silver, platinum and palladium.

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 the expected risk-adjusted returns over the coming week for gold, silver, platinum and palladium, and then balance the Kit across these metals by investing in relevant commodity ETFs.

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

Top trade ideas

Here are some of the best ideas our AI systems are recommending for the next week and month.

QuidelOrtho Corp (QDEL) – The diagnostic healthcare company with quite possibly the worst name in its sector is one of our Top Buys for next week with an A rating in Quality Value, Technicals and Growth. Revenue is up 50.4% in the 12 months to July.

Aeglea Biotherapeutics (AGLE) – The biotech company is one of our Top Shorts for next week with our AI rating them a C in Technical, Low Momentum Volatility andQuality Value. Earnings per share is down -14.34% over the past 12 months.

Graftech International (EAF) – The industrial manufacturer is one of our Top Buys for next month 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 company is one of our Top Shorts for next month with our AI rating them a F in Quality Value and a D in Low Momentum Volatility. Earnings per share is down -54.76% over the past 12 months.

Our AI’s Top ETF trade for the next month is to invest in Argentinian stocks, North American natural resources and energy stocks, and to short the bond market. Top Buys are the Global X MSCI Argentina ETF, the iShares North American Natural Resources ETF and the iShares U.S. Energy ETF. Top Shorts are the iShares Floating Rate Bond ETF and the Vanguard Short-Term Bond ETF.

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