17-Year Cycle of Inflation & Recessions
2020 Vision: The Inflationary Decade
In late-2019 & early-2020, INSIIDE Track publications repeatedly detailed why mid-2020 (July 2020 was the primary focus) would time a MAJOR top in Bonds & Notes… and MAJOR corresponding low in interest rates. Inflationary cycles were forecast to take hold in 3Q 2020 and escalate, leading into 3Q 2022.
When Covid-19 struck, and many markets produced final deflationary spikes down, the final piece of the puzzle was in place and a sharp ‘reaction’ – an inflationary surge – was projected to take hold.
That coincided with major multi-year buy signals triggered in Stocks, Silver & Natural Gas in March 2020:
About the same time, Fed chairman Jerome Powell started openly pining for a return of inflation to the markets. At the time – in late-2020 – INSIIDE Track again warned why inflation was about to take hold with a vengeance. As published then – as a type of ‘op-ed’ response to Powell’s stated desires – ‘Be Careful What You Wish For!’
2020 – 2022 – The First Phase
Mr. Powell received what he wished for as the inevitable inflationary surge took hold. The foundation for this spike had been laid in 2018 & 2019, with the final pieces put into place in 1Q 2020.
The US Dollar had another sharp sell-off from March 2020 into January 2021, exacerbating all the inflationary factors already set in motion. The outlook was clear… except to the masses.
A lot has occurred since then with Bonds plummeting (and interest rates skyrocketing) into late-2023 – when multi-year cycles converged. That was forecast to trigger an initial rebound in Bonds – leading into July/August 2024.
That fulfilled the first reactive phase and Bonds were forecast to undergo a sharp decline into late-October 2024.
That brings us to the present.
The November 2024 (10-31-24) issue of INSIIDE Track revisited this analysis and laid the groundwork for what is expected in 2025 & 2026 (published separately). This is expected to have a significant impact on:
· US Dollar & Foreign Currencies
· Gold & Silver
· Stocks
· Energy Prices
· Commodities
· 40-Year Cycle of Currency War (https://www.insiidetracktrading.com/wp-content/uploads/40-Year-Cycle-A-New-Currency-War-II.pdf)
The following is an excerpt of that analysis:
10-31-24 – Bonds & Notes have sold off sharply after retesting their August 2024 highs and quickly reversing lower. Those August 2024 highs fulfilled multi-year cycles and could be reinforcing the inflation outlook for the coming years.
The first bout of inflation, in the current decade, involved a surge from a deflationary low in ~March 2020 into an initial peak in 2022. That was in perfect lockstep with what was described in 2020 issues of INSIIDE Track:
https://www.insiidetracktrading.com/wp-content/uploads/40-Year-Cycle-A-New-Currency-War-II.pdf
There is a lot of debate as to the root cause of that inflation surge – which remains in the economy despite ‘peaking’ over two years ago – but there is no doubt it had a lot to do with the immediate aftermath of Covid-19… an extreme form of ’action-reaction’ on a supply/demand basis.
Copious amounts of money were haphazardly thrown at the pandemic, encouraging widespread fraud (large chunks of which have been clawed back by the government in recent years), and that was exacerbated by the shortages of labor and commodities.
While there are many definitions for ‘inflation’, commodity inflation is the present focus.
Many commodities had already seen initial rallies in the late-2010’s – part of that tied to a flurry of tariffs applied to various imports – but the Covid aftermath saw things like Soybeans surge from April 2020 into May 2021 – more than doubling in price (also linked to extreme Chinese buying).
Corn experienced a 150% gain during the same period. Many other commodities were similar – skyrocketing from lows in 2019 or early-2020 into peaks in 2021 or early-2022.
Cotton tripled in price as Wheat more than tripled in price, during that same period.
All of those commodities peaked in 2021 or early-2022…but the ramifications were only beginning to move through the markets.
Perhaps the best illustration of this can be seen in the action of Lumber – a commodity that has reverberated throughout the economy ever since 2020. In April 2020, the price of Lumber bottomed around $250 (per 1,000 board feet).
By Sept 2020, it had ~quadrupled in cost – spiking above $1,000/mbf.
That 2020 surge – along with exacerbating labor struggles – would have a devastating effect on home building and home affordability for several years to follow.
The inflationary ripple effect would persist… right up to the current time.
By May 2021, the price of Lumber would peak – near $1,700/mbf. The Covid-effect reached its zenith… but the consequences had only just begun to materialize. That 6 – 12-month period – from 1Q 2020 into 1Q 2021 – has had a dramatic impact on the cost of so many goods and services.
There is always a 1 – 2 year lead or lag with things like inflation and deflation. Lumber is a perfect illustration of this. Even though Lumber prices quadrupled in 2020, the impact of that would take years to be completely felt throughout the nation.
As 2021 rolled around, and it became clear this was not a temporary anomaly, home prices began to rise. At the same time, home building nearly ground to a halt as labor shortages and skyrocketing supply prices decimated potential profits and scared builders away from the market.
The 2020 ‘actions’ created multi-year ‘reactions’ that drove home prices through the roof (partial pun intended) into late-2023. Resulting interest rate hikes exponentially magnified that. Though those prices have ‘stabilized’ – more or less – the inflationary implications remain a huge burden.
That is why cycle & technical analysis is so valuable.
In early-2020, the handwriting was already on the walls (as detailed in the excerpts included in that just-cited report) – with inflation forecast for 2020 – 2022.
That was published repeatedly – before anyone began to recognize the implications… and at the same time Jerome Powell was ‘wishing’ for some inflation in the economy.
It materialized in perfect sync with related cycles!
The seeds for the 2021 – 2022 inflationary surge were planted, watered & cultivated in 2018 – 2020.
The second half of 2020 saw those plantings burst into life and surge skyward…. much like plants in Spring & early-Summer.
Since that time, they matured and are now starting to shed leaves while preparing for ‘Winter’.
The technical & cyclical outlook for Bonds & Notes powerfully corroborates that. So, too, does the outlook for the return of the 17-Year Cycle of US Recessions that has a ~93% accuracy rate – up to this point.
Unfortunately, there are also cycles arguing for stagflation to be part of that.
The onset of that recessionary period is when the expected ’C’ wave advance should be seen in Bonds & Notes (‘A’ wave advance from Oct ’23 into Aug/Sept 2024 & ‘B’ wave decline since then). For now, they have plunged into late-October and are showing signs of an imminent low in early-Nov.” — October 31, 2024 (November ’24 issue) INSIIDE Track
The outlook is becoming clearer by the day. And the current ‘Danger Zone’ for stocks could play a role in that outlook. See related publications for detailed analysis.
Specific analysis, targets, cycles & projections will continue to be published in Weekly Re-Lay & INSIIDE Track publications.
TRADING INVOLVES SUBSTANTIAL RISK!
For details and related articles, go to www.insiidetracktrading.com.