Hey everyone we kevin here in this video we're going to briefly go through a report that might tell us when inflation might actually begin to peak in our global economy, and so we've got to talk about this report. Of course, this video is brought to you by titan, which we'll talk more about in a moment and, of course you can check them out via the link down below. So this report actually comes to us from not the federal reserve this time, but the equivalent of the federal reserve in england, the bank of england - and this is the monetary policy committee meeting that ended on february 2nd so yesterday and they give us insights. And so one of the first insights that i think is really interesting that applies to america is that at the bank of england we saw a five to four vote to raise rates and this five to four vote.

Wasn't five people saying let's raise them for saying? No, it was actually five people saying: let's raise rates, a quarter of a percent and four people saying let's raise rates, half of a percent. I think it's really important that when we remember the federal reserve is not a unanimous body, it is a committee that votes. It is very important to remember that we can actually end up seeing some uncertainty come into our markets when the federal reserve starts acting like the supreme court, and we start seeing a little bit more of a divide in how these votes land because it could come Down to a joe manchin style vote as to whether or not we get a quarter, point hike or a half point hike and i think that's going to lead to some potential increased uncertainty in the market for the short term. But in the long term we end up getting some optimism out of this report, but let me get rid of some of the bad first.

So one of the bad things that they say in this report is they actually believe that wholesale energy prices aren't going to follow futures curves down. They actually believe that energy prices are going to remain high for longer, and this is why they believe that they need to be a little bit more aggressive on dealing with inflation, specifically energy costs, high consumption by the united states and the tight labor market, with pay Going up like crazy now it's obvious that every single company so far that we're looking at their their earnings reports on are complaining about inflationary pressures and how not only do they have inflationary pressures that they're facing, but how they have pricing power. Amazon just raised amazon prime 20 bucks uh gm says they have pricing power. Ford says they have pricing power.

Kimberly clark says they have pricing power. You have uh out uh ralph lauren, saying they have pricing power. You also had here what was it vista outdoors read through this earnings call pricing power, almost every single earnings report. I've been looking at pricing, power, pricing, power, pricing power, and this is really important to consider because it's it's telling central banks hey.

If every company thinks they have pricing power, then we're probably going to see inflation run a little bit hot for the foreseeable future. But the big question is how long and that's what we're going to talk about right now, right after i bring up our sponsor today, titan it takes a lot of time to keep up with everything going on in the stock market. I know i spend hours every single day researching everything that goes on and, quite frankly, this is where titan can help. You titan is the first investment platform for everyday investors that want their money, actively managed by a team of experts.

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Inflation is expected to increase further in the coming months to close to six percent in february and march. This means the bank of england actually expects inflation to hit a high before we get any lower. So if we're in january right here, we got february march april - may we kind of draw these out right here. The bank of england is basically saying we expect inflation to go up and up through february and march to in you know their their country, six percent or close to six percent in february and march, before peaking at seven and a quarter percent in april.

Let me draw this line a little differently there. We go uh. Look at that seven point, four percent in the united kingdom in april, so they actually expect an inflation peak in april. They believe that the peak is two percent higher than the peak they expected.

They would hit from their november report and they believe they're really overshooting inflation. One of the reasons uh is uh well, of course, not only wages and energy, but spending by the united states. I'm going to show you where that is and, of course, bottlenecks and supply chain issues. But it's kind of interesting that they blame the united states.

But a peak of 7.4 in april kind of means we might start seeing markets price in somewhat of an inflection point to the downside. But i expect more pain first, if we get those high cpi reports in february and march, because i don't think everybody's reading the bank of england report, but that's why you're here so we could start identifying. Where do we actually think these u-turns are going to be? Most companies are reporting, they think they there will be supply chain. Inflection points in the second half of the year, but just because you have improved supply doesn't necessarily mean that prices start coming down unless consumer demand starts waning, which would be bad if consumer demand started waning too quickly, because then we could actually start getting some potential Negative cpi or i'm sorry negative gdp prints, which would be bad.

We don't want to go in that direction, but the central bank here reaffirms that they're going to essentially print less money and they're going to focus on raising rates, so they could deal with the inflation they're facing now. They believe that take a look at this here's, the line finally found it strong demand for goods, particularly in the united states, had appeared to have a more important determinant of global bottlenecks than supply chain disruptions over recent months. In other words, the bank of england is saying: hey, don't just blame supply chain issues. The fact of the matter is, people feel richer and they're spending more money like crazy, and that is going to lead to this continued inflationary pressure and that's why we've got to start pushing rates up uh in england.

Just like what we're expected to see in the united states now in england, they're seeing the housing market slow a little bit, which i thought that was kind of interesting, and they also see some consumption indicators coming in a little bit weaker than production measures, which they Say is very different from what you're seeing in the united states where people are still spending money like crazy. In fact, they say: price pressures were more broadly based in the united states, with strong contributions from energy, cars, accommodation, accommodations and other core goods. In other words, people really willing to just spend spend spent, spend and we're seeing that reiterated by company earnings reports also, and they believe that global bottlenecks are expected to ease over the next 12 months, especially as spending in the united states rotates back to services and Away from some of these, these goods, where people are buying stuff, remember kathy wood is always telling us, hey, people are buying stuff, people are buying stuff uh, but they're going to be done buying stuff because all their shelves are stocked and then we're going to see On a sort of an overrun or we're going to see a like shelf stock too full and then we're going to see deflation because there's too much stuff and i'd originally been believing kathy wood's arguments, but every earnings call. I read so far.

I'm hearing that we're actually expecting lower inventories, amazon expecting lower inventories, gm lower inventories, ford, lower inventories throughout 2022 ralph lauren expecting lower inventories throughout 2022, same thing with even ammunition manufacturers or outdoor sports manufacturers. You name it everybody's expecting lower inventory through at least 2022. So, probably too early to really go down that sort of uh. You know deflationary rabbit, hole from overly built up supply chains and too much inventory, and it's sort of reiterated here by the bank of england, though at some point.

If we get this shift to services and that demand shifts away well, that demand shifts away from good goods and we get uh companies catching up, then maybe we'll get that deflationary impact, but possibly not until well into 2023. They also mention that, at least in the medium term, which is usually the next 12 to 18 months, they see inflation compensation measures increasing slightly. They see that, according to data they're collecting from cpi expectations and intelligence, that higher inflation, expert expectations have come in at above average levels, and this is really encouraging them to raise rates sooner rather than later. They're seeing consumption rise, they're also seeing the uh savings ratio start to fall a little bit so eventually, when people run out of money, maybe we'll start seeing a slowdown of those inflationary pressures.

Then we had a little note over here that the number of companies reporting skilled labor shortages as a constraint on output in january had remained very elevated, we're seeing exactly the same thing in the united states and they expect only a slow improvement of supply chains throughout 2022 and some are even judging that we could see the problems going to 2023.. So, even though they're calling for a peak of inflation all the way, through uh april, it's entirely possible that we're still going to have issues with a lack of inventory, whilst not seeing supply people spending money like crazy, uh and keeping again inventory low and pressures on Supply chains throughout all of 2022, so 2022 is going to be a really interesting year. Uh in the united kingdom they say that price increases have been particularly acute for secondhand cars and hospitality replicating trends in the united states. They are talking about uh, potentially implementing utility price caps, which price ceilings were what led to the disaster of the 1970s in the united states.

So i don't really support that price ceilings generally lead to like a genie bottled up, and then you shake them or whatever, and it's like ready to explode. Probably coke bottle is a better analogy there, but whatever they do believe that global activity is going to continue to grow. But ultimately, energy prices and supply constraints are going to kind of hold us back a little bit so something to keep in mind, and they do think that export prices are expected to rise a bit further more in the near term. And this is kind of the reiteration of what we're seeing here, they're expecting things to get a little bit worse for the next couple months, and then they think things are going to get better see.

They believe that consumption was expected to slow as households cut back on spending in the face of global energy prices and good prices going up and that that, because of this slowing, maybe they don't have to raise rates as highly. But this is particularly happening in the united kingdom and they make this contrast to the united states, we're in the united states we're still seeing those higher levels of spending and remember their rates are actually set higher than ours right now. They also mention that, if, if we continue to have high inflation expectations by not raising rates, then we could end up anchoring inflation expectations to levels that would merit more rate increases, but right now we're seeing inflation expectations somewhat stable, which you can usually see those by Looking up like the five-year break even on treasuries, and then you end up seeing oh okay, well, inflation expectations haven't really been growing in the united states. They haven't really been growing in europe.

Inflation expectations have been relatively stable. Now it's just a matter of getting through the drama of having some ugly potential reports potential, hopefully not, but some ugly potential reports in february and march uh and then maybe even a peak report in april and then hopefully this is when we hit a peak fear Moment and it's time to go all in on the market again, who knows we'll see? But this is a really insightful report and it reiterates a lot of what i'm reading in earnings calls. So stay tuned for more insight from earnings calls make sure to subscribe, check out titan via the link down below folks. Thank you so much for watching and we'll see you next time.

Thanks.