The inflation mirage

📊  Today’s Big Picture

Every so often, a single number sets the mood for the entire market.

Tomorrow morning, one lands.

At 8:30 Eastern, the government releases June inflation, the last big reading before the Fed meets on July 29.

Here is what most people expect. A soft number. Headline inflation slipping toward 3.8%, maybe even falling on the month.

On the surface, that looks all-clear. Prices cooling, the Fed free to ease, everyone exhales.

Slow down before you celebrate.

That cool number is looking in the rear-view mirror. It measures June, before the Iran war flared back up and pushed oil back toward $79 a barrel.

And underneath the friendly headline, core inflation, the part the Fed cares about most, is stuck near 3%.

Meanwhile the two assets people buy to escape all of this, gold and Bitcoin, have started moving in near-lockstep.

Today, I'm going to show you why tomorrow's number is a trap, what the Fed is really watching, and why gold and digital assets have started trading as one.

🔍  Signal vs. Noise

Three Headlines, Three Realities

• The first headline is that a soft inflation number means the Fed can finally relax.
• What reality says: the number looks backward, and the part that matters is still stuck.

Tomorrow's report is likely to show inflation cooling, maybe even falling for the month. That will feel like victory.

But the headline number is the loudest, least reliable part of the picture. It swings with gas and food.

The Fed watches core inflation, which strips those out, and core is still stuck near 3%, above its 2% target.

One cool headline does not move a Fed that has been waiting on core for a year.

The scoreboard everyone cheers is not the one the Fed is reading.

• The second headline is that the inflation scare is finally over.
• What reality says: the report measures June, and July already looks different.

The cooling everyone expects came from one thing above all. Oil fell hard after the Iran deal in June.

Then the war flared back up this month, and oil climbed back toward $79 a barrel.

That spike is not in tomorrow's number. It lands in next month's.

So June's report is a snapshot of a calm the war has already ended.

You are about to read good news from a world that no longer exists.

• The third headline is that Bitcoin is off doing its own thing.
• What reality says: it is now moving in near-lockstep with gold.

For years, people argued about whether Bitcoin was a risk asset or a safe haven.

The market just answered. Over the past two months, gold and Bitcoin have moved almost as one, a correlation of 0.92, where 1.0 is a perfect match.

Both fell together from their January highs. Both are bouncing now on the same hope for lower rates.

They are being traded as the same thing, an escape hatch from a slowly weakening dollar, one old and one new.

Two hedges, one trade, moving to the same beat.

The noise says inflation is beaten, the scare is over, and Bitcoin is a wildcard.

The signal says core inflation is sticky, the war has already turned the tide back, and gold and digital assets are now the same bet.

I know which side I'm paying attention to.

The Headline Is Where The Story Ends. The Research Is Where It Starts.

Tomorrow, millions of people will read one inflation number and think they understand the market.

You already know it is more complicated than that.

The real edge is one level beneath the headline, in the assets and setups most people never see until they have already moved.

That is the whole job of Gems Uncovered, our research on the early opportunities ahead of the crowd.

The headline is where the crowd stops looking. That is where the work begins.

See how it works right here…

Featured Contributor

Today, Editor-in-Chief Rami Al-Sabeq on why the oldest money on earth and the newest have started moving as one.

There’s one more number I want you to focus on.  Not from tomorrow's report, from the last two months.

Gold and Bitcoin have moved together at a correlation of 0.92.

For two assets this different, that is remarkable.

Quickly, let me explain why it is happening, and why it matters more than any single inflation print.

Why Gold Was Money For 5,000 Years

Long before governments, before banks, before paper, humans landed on gold as money.

Not because a king decreed it. Because of one property. You cannot print it.

Every ounce that exists took real work to pull from the ground. No emperor and no central bank could conjure more of it on a whim.

That scarcity is what let gold hold its value across empires that rose and fell around it.

Bitcoin Is That Same Idea, Rebuilt For The Digital Age

Here’s the pattern the book we teach from calls convergence. An old idea, rebuilt with new technology.

Bitcoin has the one property that made gold money. A supply no government can inflate. There will only ever be 21 million of them, written into the code.

Gold is scarcity you can hold in your hand. Bitcoin is scarcity you can send across the world in minutes.

For years the market could not decide if Bitcoin was a tech gamble or digital gold.

The Market Just Made Up Its Mind

That 0.92 correlation is the answer. When the dollar is strong and rates rise, both sell off. When the pressure eases, both climb.

They are now traded as two versions of the same hedge, against the same slow force, a currency losing its value over time.

The whole team here at Future Finance is watching this convergence closely, because it is where the biggest long-term shift is happening. The old store of value and the new one, moving into the same role.

The lesson is bigger than tomorrow's number.

One inflation print is weather. The move out of paper money and into things that cannot be printed is the climate.

Positioning for that climate is the whole reason we built Gems Uncovered.

It is where our research team hunts down the scarce, asymmetric assets riding this shift, the ones most people find only after the move is over.

If today's read on gold and Bitcoin made something click, this is your next step.

See what's inside Gems Uncovered here…

💭  What To Watch For

Tomorrow: June inflation and Warsh in the hot seat.

The CPI lands at 8:30am, and Fed Chair Kevin Warsh gives his first testimony to Congress the same day. Watch core inflation, not the headline, and watch whether Warsh sounds any softer.

Big bank earnings kick off.

JPMorgan, Goldman Sachs, Bank of America, Wells Fargo, and Citigroup all report Tuesday. Their results are a read on how the real economy and the everyday borrower are holding up.

The war and the Strait of Hormuz.

Oil is back near $79 on the fighting. Watch whether the shipping lane stays open, because today's oil is next month's inflation.

The Fed on July 29.

Rates sit at 3.50% to 3.75%. Tomorrow's number is the last big input before that decision.

💭  Today’s Final Thought

Tomorrow, a single number will set the mood.

It will look cool, and plenty of headlines will call the inflation fight won.

Enjoy the calm, then look straight past it.

That number measures a June that ended before the war came back and pushed oil higher. The core, the part that matters, is still stuck. And the Fed still has not moved.

Zoom out further, and the real story is not one month of prices at all.

It is the slow migration of the world's most cautious money, and now its boldest money too, out of paper and into things no government can print.

Gold has played that role for 5,000 years. Bitcoin is learning to.

Tomorrow's number is weather.

The shift into hard money is the climate. Position for the climate.

- Rami Al-Sabeq (Editor in Chief | Future Finance)

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Disclaimer: This content is not financial advice, it is for informational purposes only. All investments involve inherent risk. Any financial decisions you make are solely your responsibility.