Hey Subscriber,

Helping steer the stock market wealth of thousands of families through the last 90 days has been, to say the least, a challenge and very stressful. Our promise to you is we WILL get the major S-curve inflection points right in both the macroeconomy and the microeconomic sectors.

Thankfully, we had already placed the vast majority of our portfolio risk (as in 75%) into what turned out to be primary beneficiaries of what only 40 days ago was an unthinkable event--European war in 2022?

Thanks to our portfolio saving intel from our TR Research network (who called the Ukraine invasion to the day) our TR Ultra Income portfolio up 39% this year (32.6% + 6.4% dividend yield) (click here for the UI Portfolio) vs. -5.2 to -10.9% for the SP 500 and the Nasdaq 100 QQQ is certainly a point of pride for Team Transformity.

But let me be clear with you: We ARE living through an unprecedented tooth-grinding sleep-depriving age of macroeconomic divergence and geopolitical transformation ALL at the same time. And the calculus of all this transformational economic change in macro and microeconomics takes a LOT of research and reading and hypothesis creating/testing to come up with a profitable game plan for these uncertain times.

The good thing is--as my Mom Pat Smith would say back in the day-- "This is what Tiggers do best!"

Let's first start with the head-shaking GOOD news that has come to the world of investing in US stocks since the Feb 24th invasion of a sovereign European country by the profoundly insane Vlad Putin's Russian military and Russia 2.0 vision.

#1 The US stock market (as measured by the SP 500 and the QQQ) has literally taken everything but the kitchen sink thrown at it and held firm and in fact rallied off two dips briefly under 4200.

Why is that? Because in a world of global investors, EVERYTHING is relative to everything else.

And in a world of 24/7 risk, US stock market risk is much less--that is what the wave of cash INTO US stocks is telling us.

Do we have a bottom in for the SP 500?

It sure looks like it is technically speaking.

But as we have shared, the world obviously in many ways has radically transformed into a Cold War 2.0 world in less than 45 days. The Western NATO Axis and the new Russian/China Axis of geopolitical power are now facing off again in military and economic warfare. In this new macroeconomic reality, the Russian military invasion of the sovereign state of Ukraine obviously brings a whole slate of economic risks that did not exist 35 days ago.

Key Point: Yet clearly on a RELATIVE basis, in a world of 4 million Ukraine refugees in Europe, threats of tactical nuclear bombing in Ukraine and 150% higher costs of energy and agricultural commodities in Europe vs. USA, the odds of macroeconomic recession and risk from runaway inflation (food/energy/interest rates) now embedded in the giant EU economy are exponentially higher in Europe than the United States.

In addition, the bottoming in the US stock market at the same time as the Fed's transformation of "just wait--inflation is transitory" to the incredibly hawkish "We will raise interest rates as high as 50 basis points per Fed meeting until we crush inflation" US Federal Reserve says to me that 1) investors in US stocks LIKE the inflation-fighting stance of the Fed now and 2) JayPOW still has a LOT of juice.

Bottom line: The global investing world has decided that the relative "lowest risk/highest growth opportunity" for public equity investors is the US economy with an economy so strong it just recorded the monthly lowest jobless claims in 52 years!

And let's not forget that in WWII, while the European "bourses" aka stock markets tanked, The Dow increased 10% on the first day of trading after Hitler invaded Poland in 1939. When the attack on Pearl Harbor occurred, stocks fell 2.9% but regained those losses in one month. From 1939 until the end of the war in late 1945, the Dow saw increases of 50%, more than 7% per year.

I think my old friend Jim Paulsen is more right than wrong when he points out in his latest macroeconomic research report (which I never miss). According to Jim "Things are so bad that stories which would normally be front-page news—like the waves of Covid cases and deaths, China locking down cities, and North Korea firing off long range missiles—barely rate a mention.

Nuclear weapons?

No wonder stocks have been tanking this year.

And U.S. consumer confidence numbers are at lows only seen during the global financial crisis and crises of the 1970s. Indicators like the American Association of Individual Investors’ weekly sentiment survey, and the CNN Fear & Greed Index, show investors are at extreme levels of misery.

If you’re tempted to cash out the stock funds in your IRAs and 401(k)s and hide under your desk, you are not alone.

But before you do…take a moment.

Here are his 3 key reasons to look on the bright side.

Everything is reopening

#2--The big news of the moment, largely forgotten in the current panic from Eastern Europe news, is that the pandemic is mostly over. Policymakers, and even the media, have finally come to accept that Covid isn’t going away but will have to be managed: It will be “endemic,” instead of a pandemic. The BA.2 in Shanghai outbreak is because all of the shutdowns in China left the highly-dense populations of Hong Kong and Shanghai highly sensitive to variants.

Net result: The US and the world are reopening. Businesses are starting up again. People are going to travel. They are going to shop. They are going to go out to restaurants.

Oh, and critically—the stores are going to have to restock their empty shelves, after two years of supply chain crisis.

Inventories are at historic lows compared with our gross domestic product, he points out. Business order backlogs are near 30-year highs. Furthermore, he adds, consumers are sitting on about $1.5 trillion in extra savings because they have spent less money over the past two years.

While the Atlanta Federal Reserve’s real-time GDP tracker we follow shows first-quarter growth tumbling to 1%, Paulsen points out the Citi U.S. Economic Surprise Index is surging upward. And it has a record of leading where GDP follows. Meanwhile, corporate earnings are looking extremely healthy and estimates have been revised upwards since the start of the year.

As for the humanitarian disaster unfolding in Ukraine due to the Russian invasion, the actual effects on the U.S. economy are likely to be smaller than the headlines would suggest, and temporary, Paulsen argues. And that’s true whether the war ends soon (let us hope), or it turns into a protracted stalemate.

Jobs and the "Great Resignation"? The U.S. economy created 1.2 million new jobs just in the first two months of this year—a stunning achievement, and one achieved despite the lingering drag of the Omicron Covid outbreak. There is a lot of room still to grow. We’re still more than 2 million jobs below the pre-Covid peak, and Paulsen notes that after every recession since World War II the jobs market has risen to fresh highs—often much above the previous peak.

U.S. Labor Department numbers suggest the economy could generate another 7 million jobs just to get back in line with the growth trend seen just before the pandemic. Paulsen points out that the unemployment rate has plummeted in the 44 states with the smallest economies, but not yet in the “Big Six” that actually contain most of the jobs—namely California, New York, Texas, Illinois, Florida, and Pennsylvania.

Meanwhile, wages are booming. The Atlanta Federal Reserve’s proprietary “wage tracker” shows annual wage inflation skyrocketing to 5.8% — higher than at any time since at least the 1990s. But as Paulsen points out, most of this wage growth is among the lower-skilled and lower-paid, who are finally getting (slightly) better wages. So we’re hiring millions more workers and they have a lot more money to spend—especially those most likely to spend.

Inflation?

This brings us to the 800-pound cliché in the room, namely inflation. YOY inflation rates are the current source of panic and much talk about 1970s style “stagflation” where the GDP growth rate remains below the inflation rate.

But as Paulsen puts it, “inflation hysteria is everywhere—except in the financial markets.” Despite all the panicky headlines, the bond market isn’t worried about inflation. Nor is the stock market, or the foreign exchange markets.

Context matters. In the 1970s, for example, when inflation hit 6% the bond market responded by demanding an 8% yield on 10-year U.S. Treasurys, to reflect the risks. Today that yield is not even 2.5%. In the 1970s, surging inflation crashed stocks. This time around, there’s been a correction but so far it is reasonably modest. Oh, and in the 1970s surging inflation tanked the U.S. dollar on foreign exchange markets.

This time the dollar is rising.

The Atlanta Fed says current inflation is mostly in things with highly flexible prices, like cars, fuel, clothes and food. Those prices can go down as fast as they go up. The inflation rate among “sticky” items like rent or medical care, where prices tend to stick once they go up, is measured Year over Year and in Q2 are up 4% and year-over-year dropping like a stone.

The key inflation measure to watch is the so-called five-year “break-even rate” in U.S. bonds, a technical measure that is effectively the bond market’s own five-year inflation forecast. And it’s up—it’s been rising for over a year—but it is still 3.57%, or less than half the current inflation rate. In other words, the bond market is still predicting inflation is going to halve from these levels, and reasonably quickly.

The bottom line is I am an old bond guy. The bond market is the collective wisdom of the bond market which is THE INFLATION forecasting genius.

If you know something the bond market doesn’t and has priced in, go out and make yourself rich.

OK, How About Ultra Growth?

The QQQ is the proxy for our Global Digital Platform Dominators in our Ultra Growth Portfolio...it now looks "overbought" and needs to give us a pullback:

#2 At the same time, the US Treasury 10 year Bond has crashed by 11% in value in 2022 (lost 9 years of yield in value) while rates have literally gone parabolic (ending a 32-year bull market for US Treasury bonds)

But again--US stocks have taken ALL these hits and recovered.

Why?

Global economics are RELATIVE to each other--not a monolith. And the Bond Market alternative is guaranteed loss of money.

So...we are NOT rushing into crazy risk here ok?

But on the other hand, read ALL the above again if the headlines have made you fearful.

Let's recognize that the EASY MONEY has been made in the "Screw Russia" trades aka replacing all the Russian commodities with Wester providers.

We need to have PULL BACKS in oil, nat gas, fertilizer, etc etc etc stocks to make money AS THE WEST cuts off Russia from the Western world.

But we will have a perfect example of a "pull back" Ultra Income + Growth play for you tomorrow...perfect example of NOT CHASING "Screw Russia" stocks.

Have a great night...there is a LOT of opportunities here IF WE keep our wits about us and not fall into a fearful state of doing nothing or worse going to cash in US stocks, ok?

Toby

How To Keep Your Wealth Growing 25%+ Per Year In The Age Of Putin And Powellism