Spare a thought for Jeff in our ‘Midweek Trading Report’.

A 0.2% Miss In Inflation Cost Bezos Nearly $10bn.

This week has gone from hero to zero in a matter of minutes. After a good start, yesterday ended as the 9^th worst daily loss in the history of the US stock market!

We started Monday on a positive note as Stocks in London opened higher after a good day on Friday.

The FTSE 100 index was up 52.61 points, or 0.7%, at 7,403.68 early Monday. The mid-cap FTSE 250 index was up 94.31 points, or 0.5%, at 19,282.34. The AIM All-Share index was up 2.25 points, or 0.3%, at 882.85.

In mainland Europe, the CAC 40 in Paris was up 0.3% while the DAX 40 in Frankfurt was up 0.7% early Monday.

"I believe that the latest market optimism could be explained by hope to see a second month of softening inflation in the US at this week's CPI release," said Ipek Ozkardeskaya at Swissquote Bank.

The US was also playing ball posting some good gains right up until they released their August inflation report.

The consumer price index increased 0.1 per cent for August, above economists’ expectations for a 0.1 per cent drop. Most worryingly for policymakers, core inflation — which strips out volatile items like energy and food — rose by 0.6 per cent for an annual increase of 6.3 per cent, compared with 5.9 per cent recorded for July.

The figures from the Bureau of Labour Statistics brought an end to a brief respite for Fed officials after July’s reading showed that prices had not risen compared with the prior month. Wall Street was caught off guard by the hotter-than-expected inflation figures. The S&P 500 closed down 4.3 per cent, the worst performance since June 2020. The Nasdaq Composite, which is stacked with technology companies that are more sensitive to changes in interest rate expectations, ended Tuesday more than 5 per cent lower.

On the face of it, a miss by 0.2% on the month doesn’t seem like that much, and that’s because it isn’t. The problem we’re facing at the moment is that inflation seems to be the trigger word for the valuation of all US stocks, and where they go, we all go.

Of course, 8.3% year on year rather than the expected 8.1% is disappointing, but the previous month was 8.5% so it’s still a drop in inflation. Does this small difference really warrant the 9th worst stock market loss in the history of the American stock market? because that’s what we saw yesterday.

Just in case you thought you had a bad day.

At The Portfolio Platform, we need bad days like this. Without them, we don’t get opportunity. Many of our traders had sold out a fair amount of their holdings on Friday/Monday and Tuesday. We need drops to then buy back in. We weren’t expecting this one to happen quite so quickly, but our fingers are crossed that the traders’ buys will be profitable over the coming weeks.

To counter the US inflation report yesterday, this morning we had CPI data in the UK. This was an even bigger surprise but in the other direction. Economists expected 10.2% but it came in at 9.9%. Surely the FTSE would celebrate this in the same way the US commiserated, but alas, it turns out we have no control over our own market as we simply don’t have the buying power that the Americans have. If they’re selling, then the markets come off all over the world.

On the back of a 0.2% miss in the US yesterday the FTSE sold off from 7505 yesterday lunchtime to 7275 today.

Our take on this is that inflation is doing what we hoped it would and we have to ignore the incredible amount of noise around us. Inflation was down 0.2% in the US and it was down 0.2% in the UK. This was worst than they expected, but better than we expected.

If you needed something to define the attitudes of two nations, this wouldn’t be far off it. The same result for both, they assumed it would be better, we assumed it would be worse. The fact is, it’s a steady decline which is the best we can hope for at this moment in time.

Our traders will keep their heads and look to increase positions at the right times. It might not be today or tomorrow, as sadly life/trading doesn’t work like that, but over the next week or so we would expect another reasonable rally where TPP can look to do the same as we did last week. Buy, wait, sell, wait, repeat.

This current situation is not permanent, nor is it one with major systemic risk, therefore, money can be made by timing it right.

Who knows what the rest of the week will bring but hold on to your hats. When we do get another move up, we should do very very well.

If you would like to discuss building a TPP inspired portfolio that aims to yield 2-4 x market performance per annum, do not hesitate to get in touch. The majority of our traders were flat or short yesterday, meaning the impact of the market massacre was incredibly minimal. Could your IFA or wealth manager say the same?

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