Print the page
Increase font size

Why Stocks Are Due For a 40% Crash In the Next 6 Months

Graham Summers

Posted September 13, 2021

Graham Summers

On Friday I outlined how the latest inflation data is terrible news for stocks.

As a brief recap, the official inflation measure, the Consumer Price Index, or CPI, is gimmicked to the point of fiction.

The reason for this is simple: this is the number everyone looks at. And if it reflected reality, Americans would realize that "quality of life" in this country has been in decline for the last 40 years as real costs of living have dramatically outpaced the rise in incomes.

Because of this, if you’re interested in getting a more realistic measure of inflation, you need to look at the Producer Prices Index (PPI), the CPI’s less known, less watched, but more accurate cousin.

Unlike CPI, which is crafted by bean counters at the government, PPI is based on actual information from actual producers of goods and services who must adjust their costs based on inflation or lose profits in the real economy…

Which is why the latest PPI data point is catastrophically bad, clocking in at 8.3% year over year (YoY) for the month of August.

This is up from 7.8% YoY for the month of July.

In simple terms, inflation is roaring higher today. Many investors believe this is great news for stocks. And they are greatly mistaken.

During the last major bout of inflation in the 1970s, stocks initially ripped higher for a few years before crashing ~50% erasing all of their gains and then some. Even worse, the stock market finished the decade having gained ZERO in 10 years.

Industrial Average

With inflation roaring higher once again today, we have to is ask… are we due for another similar period of low returns?

Unfortunately, I believe it’s very possible. Stocks are extremely overextended above their 50-month moving average (MMA): the line that has served as a guide throughout the bull market started in 2009.

Any time stocks get this stretched above this line, there is a “snapback” at some point to test the 50-MMA. This would mean stocks collapsing some 40% to 3,100.

SP 500

I’ll outline how to profit from such a move in tomorrow’s article. Until then…

Best Regards,

Graham Summers
Editor, Money & Crisis

The Fed Doesn’t Want You to Know This

Posted September 16, 2021

By Graham Summers

This may be controversial...

These Inflation Numbers Are No Joke.

Posted September 15, 2021

By Graham Summers

A Crisis is Brewing...

Time This Happened, Stocks Crashed 50%.

Posted September 10, 2021

By Graham Summers

Inflation is ROARING — here’s why that’s important for you...

Are These Sectors Warning Us That Something BAD is Coming?

Posted September 09, 2021

By Graham Summers

Let’s take a closer look...

Forget About the Economy... This is How You Know a Bubble is Bursting.

Posted September 08, 2021

By Graham Summers

One of the most difficult things to learn about the stock market is the fact that it has little, if anything, to do with the real economy.

We are Now Entering the Crisis Phase of Inflation

Posted September 07, 2021

By Graham Summers

Stagflation is here...