Inflation In The Statistics Leads To Recovery Risks

It sure seems like things are moving fast these days. Whether it’s the price of the things we buy regularly, market news and economic current events, non-linear disruptions in the supply chain or the myriad financial powder kegs stacked high and wide, keeping up with everything is more than just a lesson in time management. That is to say, these are not just challenging times on Main Street or on Wall Street, but rather, these are times when the fundamentals are rapidly changing, and sooner or later, the fundamentals will have to matter. Therefore, now is a good time to review some of the fundamentals.

INFLATION IS HERE

Inflation (rising prices) is starting to show up in the official statistics in a big way. Of course, many are brushing off this inflation as “transitory”, and others are saying the latest Consumer Price Index is a mathematically skewed statistic, the result of the timing of the lockdowns and the shutdowns in 2020. Regardless, headline inflation for March 2021, was up 2.6% from March 2020, and up 0.6% from last month. In my opinion, even at a more realistic price of $28 to $32 for physical silver, in hand, there is no better inflation hedge than silver. Moreover, silver is still a country mile away from its all-time record high in nominal terms, basically fifty dollars, which was set all the way back in 1980. The question is, how fast will silver move to $50 and beyond this time, assuming, of course, that silver goes on this inflationary ride along with everything else in this world.

RISKS TO MAIN STREET

There are some pretty serious risks to the economic recovery on Main Street right now, and inflation is only one of them. Other risks include increasing civil unrest, including looting & riots, a setback in reaching the official end to the pandemic, continued supply chain disruptions, and more.

Cities are once again quite literally burning across America. No matter one’s political beliefs, nightly scenes of buildings on fire, vandalized property, tear gas, and flashbangs are never good for an economy in the best of times, and these are clearly not the best of times. Making matters worse for life, liberty & property, the high-profile trial of Derek Chauvin is sure to have adverse consequences in cities around the nation, regardless of the verdict.

Complicating the recovery, we have a pandemic that has yet to be declared over, which means we have unknown Federal government fiscal actions or the inability to act once the pandemic does end. What happens when the eviction moratorium ends? What happens when the extended unemployment benefits end? Will there be another round of stimulus checks? To say there are many unknowns is a major understatement.

The ongoing global supply chain disruptions are noteworthy in their own right, and the supply chain disruptions are broad-based. From the ability to source or purchase everything from computer chips to physical silver, if one thing is clear, it is that certain parts of the economy are booming because of the supply chain disruptions while other parts of the economy are downright struggling if not outright devastated.

ADDITIONAL RISKS

On a macro level, we can see that as a whole, geo-political risks are on the rise as well. Whether we’re talking about geopolitical tensions in Europe, in Asia, in the Middle East, or somewhere else, arguably, with so many nations around the world still grappling with the pandemic internally, suffice it to say that on the global stage, the stakes are high just at a time when nary a blunder or mistake can be made, especially when the outcome of such a blunder or mistake could result in regional armed conflict or conflict between superpowers. Furthermore, geopolitical risk could cause turmoil in the financial markets to say the very least, where the word “contagion” could become a buzzword again, only, not in the sense of disease but in the sense of financial repercussions.

MARKETS OBLIVIOUS

All things considered, especially the economic recovery on Main Street, the markets continue to be oblivious. The US Stock market continues to hit record high after record high, market participants have no fear of any downside, gold & silver are on mute, and since a tidal wave of money can seemingly flow into any sector at any moment, no trader or investor wants to be caught flat-footed. Currently, the fundamentals do not matter one bit, although sooner or later, in my opinion, the fundamentals will become overwhelming.

And now, let's take a dive into the charts.

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Paul Eberhart
Paul Eberhart
Senior Market Analyst and Columnist

Paul Eberhart has been actively trading and writing about precious metals for more than a decade. A U.S. Army Iraq War Combat Veteran, he holds an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill.