What Does Inflation Do To The Stock Market

What does inflation do to the stock market? Well, let's talk in detail about that. So with me today, I brought Randy Tate, the CEO of iFlip, to talk about a few things. Number one, what does inflation just do to the market in general and the market makers? Next, what's the relationship between inflation and interest rates that have caused this grand recession we've been in now for almost two years? And last, what are the strategies that you're using or that we can use through proper AI and software to really manage your stock portfolio in a period of inflation? So with me today, again, I brought Randy Tate, CEO of iFlip. Randy, welcome. Let's have a conversation. So what does inflation do to the stock market? I brought an expert CEO of iFlip, which handles smart folios. It's an app that AI-driven into your market folio. And I brought in Randy Tate, who is the CEO and a business partner of mine, to have that conversation. So welcome, Randy. Hey, thanks, Laurel. Happy to be here. So talk a little bit about what inflation does to stock prices, because I don't think most people understand that. Well, yeah. Think about what inflation actually is. Everyone thinks of inflation as, oh, jeez, the gas prices went up. Well, yes, inflation means it got bigger, so it inflated. It's intuitive. But really, what's going on? So what can happen, and you see a wave of this, and that's why you hear the term the recession is coming. I know we're going to talk about interest rates in a When the interest rates are doing what they're doing, and the price of goods to the producers, to restaurants, let's use restaurants as an example, everyone's complaining that their Big Mac's $10. Well, why is their Big Mac $10? Well, the price of beef went up. Why did the price of beef go up? Well, gas prices went up. Why? Because they got taxed. And so you can look at all of that in the whole supply and demand thing. The other thing that makes inflation go up is there's too much money in the world. I'm not going to get political, but if you look at what the government did during COVID and how much money they dumped into the economy, they literally dumped trillions of dollars into the economy. So it wasn't so much as in the beginning, it wasn't because the price of stuff cost more to produce. It was because you have less of it. And we all know if you only got three and 10 people want one of those three things you got, you're going to charge more. That's the simple nature of the game. So it all comes down to that. The only way it comes down is to get the consumer prices have to come down. For consumer prices to come down, fuel and stuff has to come down. I know, but let's put in there, in fact, it was Kelly, our business partner who designed all these Smartfolios who said with the wage increases, which as you know, in your state, California, it's the insane minimum wage. Now you have wage hikes that are inflated, which caused the prices to possibly not come back down. Because what are you going to do, just cut everybody's salary back down to 12 bucks an hour versus- It's not coming back. It's not coming back. I think we're going to be saying this because of our lovely political environment for a while and until states want to reset and re-regulate. Wouldn't you agree? Yeah, which I don't see as possible. I can't see a path where prices come down. I don't see it. Maybe there's something out there, I don't know. Wages have gone up, but even with all the wage increase, we're still making less money now than we were pre-COVID. If you go back to 2019, you had more money in your pocket making $8 an hour less if you worked at McDonald's. That's the new world. So adjustments are going to have to happen or the wedge between the middle and the upper gets bigger and bigger. Yeah, and it will. It will. Randy, talk about the relationship between inflation and interest rates. I don't think a lot of people understand that inversion. Well, you know, I'll just make it real simple. So when you hear people say the interest rates are inverted, what does that mean? That means that it costs more money. So think about this. Would you think it would be more expensive to get short-term money or long-term money? Which one should be more expensive? Well, generally, it would be on the short side. When you flip it the other way, it's more expensive now for me to get a 10-year loan than a two-year loan. So when those are inverted like that, 100% of the time in history, a recession has landed. So when you look at the two-year yield curve versus the 10-year yield curve and they're upside down, you know something bad is on the horizon, and that is 100% caused by inflation. And what do you see when you say something bad on the horizon? Well, all signs point to at some point, you know, it's an election year, so it's a different animal, but all signs point to a significant 10% to 15% to 20% to 30% correction in the markets. Now, it might not hit every single stock all the way across the board, but even our AI is very, very cautious right now. It's going to take very little movement down for the AI to come out. It's not going to give a whole lot of wiggle room before it puts everybody in the cash. It says, yeah, we're not going to ride that thing down. We're going to get off the train. So, you know, that's where we're at with it right now. Yeah. So a lot of people say, bonds are more safe and attractive than some of the stocks. So talk about the bond curve also with inflation interest rates. Well, bonds right now, if you look at the bonds, that is how governments raise money. So they're not paying anything for it. So who's going to want to buy a bond the government's not giving you very much money for when there's way easier places to go get money. So nobody's investing in these bonds. So the ability to raise capital is going away, less capital, more inflation. It's the same slippery slope. Those all those pieces, Laurel, the yield curves, the interest rates, the bond markets, they're all connected. As goes one goes all of them. Yeah, it's rough. So before we go to our last point that we want to discuss today, please subscribe to my channel. If you've not so far, click that notification button. So you hear five days a week and you've got a video popping in your inbox every morning and then watch the video. What a novel concept and start conversations. Share that my channel with as many people as you can. And if you want it, I flip app. We have a link to it below. It's seven dollars a month, minimum of five hundred bucks to put it in and make sure you are really having some precaution and some smarter thinking as we move through this recession, inflation and interest rates. So, Randy, back to you. So talk about some of the strategies to protect your investing during these inflationary times. Well, and funny you say that, Laurel, tomorrow, I believe tomorrow is tomorrow, Friday. Yeah. Either tomorrow or Monday, we will be releasing a new smart folio called Shield Plus. It is designed specifically to protect you in inflationary times. So that is brand new. It's going to be things like gold, crypto, a little Bitcoin in there. Going to have, you know, some various staple items that everybody always has to have. They might not be a rocket ship to the moon, but that's what they're going to do. The other place you put your money is in things like crypto. We also, for those of you that don't know us, recently released a smart folio called Bit Flip, which is using the A.I. that Flip has produced to trade the IBIT, which is the ETF that is Bitcoin. And it was really funny. We did that, and within two weeks had over half a million dollars invested in it. It went really fast because people understand that. So now you've got to start looking at things. What's paying me dividends? Is dividends important to you? You can get, you know, six, 7% dividends on a flat market. You can take almost zero risk and low volatility and produce six, 7% in really volatile bad times. You're way ahead of the game. You know, we look at it this way. We want to beat the S&P 500. So when the S&P 500 goes down 20%, if we come out in a 2% year, we're really happy. That's the idea. And what has been the trend of Flip beating the S&P in the past years? Yeah, overall, since we started in 2017, we're about 100% ahead of it, roughly. I don't know what the market did today. I saw it was down a little bit. And that doesn't mean we beat it every single year. In a year like 2022 is a good example. The market went straight up. If the market goes straight up, all you can do is go along for the ride. There's nowhere to beat it. I mean, that's 2023. If you go to 2022, market was down 20%. We were down in 2022. We were down 2.5%. But the market was down 20%. So that's an 18% wham that you get. We did the same thing in 2020, in those volatile years. So the idea is to take a little bit of the standard mantra, invest for the long term, you got to be invested, and you got to play the long game. The difference with us is you don't have to be in for the long game. Be acceptable of cash. It's okay if your AI moves you into cash for a few months. Why would you rather be in cash or be all invested and have that go down 10%? That's the idea. Absolutely. So again, grab your app. It's in the description below. Randy and I also lead once a month a program called the Millionaire Intensive. It's a free one-day event. You actually can be in a marketplace and make some money. You say, what do I sell? Well, come on. So we'll give you two tickets for free to come see us at our Millionaire Intensive coming up. And we do it once a month. So grab our schedule on IntegratedWealthSystems.com. And again, you have any questions ever, go to askLaurel.com, ask a question, make a request, and we'll be back tomorrow with another topic.