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Inflation Brewing, Significant Inflation Rise Expected in 2018 and 2019

InvestingHaven’s research team observed that inflation expectations at the start of 2018 are on the rise based on 5 indicators: the Fed Fund rate, the Baltic Dry Index, the copper to gold ratio, the commodity index and the TIP-to-TLT ratio.

Since these indicators did not really change course although some of them have fluctuated.

There is one specific indicator that we tned to use to summarize inflation expectations. It is worth calling it out as our leading indicator. It is the TIP ETF, a measure for future inflation.

The TIP chart embedded in this article has a beautiful setup, and it certainly spells that inflation is on the horizon. The rise of the price of crude oil certainly has contributed, but it is not the only factor. Commodities in general, as said in our commodities forecast 2018, are in a rising trend. It may not be clear to most but the long term charts are clear, and a secular breakout is near.

We are certainly not alone expecting inflation to show its head. This BI article looks at similar indicators as we do, as well as this one and this one on CNBC. Exceptionally, we agree with what we have found on mainstream financial media (note, though, that this is very exceptional).

Also one of the leading gold analysts in the world, Stoeferle, well known from his In Gold We Trust reports, signaled that their proprietary inflation indicator is on the rise.

This implies that inflation sensitive assets may do very well in 2018 and, more so, in 2019. Will gold outperform as well? Yes, we believe so, although not only because of this rising inflation expectation, but also driven by ‘risk on’ sentiment (similar to the 2002 period). Gold Price Forecast For 2018 turned bullish at the end of last year, and we wrote recently as well that our Short Term Gold Price Prediction is bullish.

The inflation expectation chart below suggests that a breakout will take place somewhere later in 2018, and may pick up in 2019.

 
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