What's Rising and What's Falling

Written by Jason Simpkins
Posted May 28, 2021

Prices are rising.

I've been telling you that for more than a year now. 

But now everyone else is coming to realize that.

Even a cursory look at pricing data is disappointing, if not bleak. 

I know we've all been cooped up in our houses for the past year. 

And if you're anything like me, you've been dying to get out — out of the house, out of the city, out of the state.

But if you do, be ready to pay through the nose for the privilege.

Gas prices reached a national average of $3.04 per gallon as of Wednesday, according to AAA. That's $1.12 higher than the same time one year ago and $0.17 more than last month.

Worse, drivers hitting the road over the Memorial Day weekend are expected to face the highest gas prices since 2014.

Flying isn't any better.

Domestic airfares are up 9% since April 1 while international fares are up 17%.

Thinking of buying a car with better mileage?

Good luck.

New cars cost an average of about $40,000 in April according to Kelley Blue Book, up about 2.2% from last year. At the same time, the typical cost of a used car is now up to roughly $23,000 according to Edmunds. 

Of course, I don't really expect that to keep anybody home. 

But let's say you wanted to stay put in your house.

Great. I just hope it doesn't need any work done.

If you want to duck inflation, you can't improve your house. Put those hammers and belt sanders down, people.

Residential construction materials are up 12.4% over the past 12 months according to the Producer Price Index.

Even eating is a squeeze on your wallet.

Food prices have climbed for 11 consecutive months to their highest level since 2014. 

Corn prices are 67% higher than a year ago. Sugar is up nearly 60%. And prices for cooking oil have doubled.

But now we've talked about what's going up. 

Let's talk about some things that are going down. 

Consumer confidence, for one. 

The U.S. Conference Board said that its Consumer Confidence Index fell to a reading of 117.2, down from April’s revised reading of 117.5. The data missed expectations as economists were expecting a reading around 119.

It seems rapidly rising prices have a dampening effect on buyers' outlook.

Nowhere is that more obvious than in the housing market.

The market has been red-hot for the past year, but now it's starting to show some signs of cooling.

New home sales fell 5.9% to a seasonally adjusted annualized rate of 863,000 units in April after March’s sales were revised down to a rate of 917,000 homes.

"Demand is robust throughout the country, but homebuyers continue to be held back by the lack of homes for sale and rapidly increasing home prices," said Joel Kan, an economist at the Mortgage Bankers Association.

The MBA also said its seasonally adjusted Purchase Index decreased 4.2% in the week ended May 21 from a week earlier, reflecting a 7.2% decline in applications for refinancing. This is because mortgage rates have been inching up alongside inflation.

Then, of course, there's the crypto crash. 

Bitcoin has shed more than half its value, tumbling to $30,000 from its mid-April peak of $65,000. 

So it seems the appeal of highly speculative investments is waning as well. 

And thus, we have the dark horse that's slowly made a comeback: gold.

Indeed, gold took a serious breather through the winter and spring. But as we head into the summer it's suddenly showing new signs of life. 

Prices even broke above $1,900 this week and traders are once again eyeing $2,000. 

Aiding that climb was a mid-May stock collapse that saw the Dow shed more than 1,000 points of value, or 3.5%, while the S&P 500 fared even worse, tumbling 4%.

Both indices have since recovered a bit, but the jolt was a serious wake-up call to the broader market. 

It should be a wake-up call to investors as well. 

Remember that falling stocks, economic weakness, and rising inflation are the perfect storm for gold prices

For that reason, $2,000 gold is a foregone conclusion as far as I'm concerned. 

And it'll probably shoot much higher than that should some of these downward trends continue.

Fight on,

Jason Simpkins Signature

Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of Wall Street's Proving Ground, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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