Credit Flow Investor

0.145 by Dec…

Above 0.146-0.147 is official bull….

Home builders take the first hit before SPY.

See Last November and December before big drops in March and April.

LEN down 6% MoM and -11% from peak price beginning of Sep.

As we all know 2022 was bad for stocks…inflation was rising quickly.

AND bad for bonds as rates rose from 0% to 4.x%.

And we now know 2023-2025 has been good for stocks.

Why? Inflation has been falling for the whole period. Even when the Fed was dropping rates in 2024!

BUT now we have falling rates and declining growth with rising inflation

(also GDX +100% YTD indicates future inflation 2026)

which causes SPY hiccups and runs to risk off assets.

AND eventually a nervous breakdown – liquidation/crunches in the risk markets.

‘Stagflation’ as JP has noted.

Note-peak of inflation Jun 2022…stocks bottomed Oct 2022.

Then stocks rallied from Oct 2022-Sep 2025 as inflation fell from 9% to 2.4%.

Service inflation fell from 8% to 3.5%.

BUT now inflation rising the last 4 months and more as rates drop.

Services have stopped falling and started to rise again the last 3mo.

• https://econbrowser.com/archives/2025/09/ej-antoni-factor-in-the-millions-of-people-missing-from-the-labor-market-dont-have-jobs-but-are-excluded-from-official-unemployment-calculation

USD weakens again slowly.

FXC is a good leading indicator for liquidity and it started drying up in July…

Last inflation was 0.38 (core inflation 0.35). Assuming a mild acceleration and a later deceleration…

the YoY below is indicated.

As inflation picks up, it will reach 5%+ by next year.

AS inflation surges, growth dies. Recessions are built on inflation and negative growth.

As the Fed drops rates, inflation surges killing growth.

But IF THEY DONT DROP, GROWTH DIES EVEN FASTER.

THEY ARE CAUGHT BETWEEN A ROCK AND A HARD PLACE.

In a recession (very special times), bonds now disregard inflation and

respond to falling growth/recession.

IRONICALLY, inflation is now our friend.

AND stocks don’t like negative growth and rising inflation. (also wages can’t/won’t keep up).

AND monthly CPI surges big…

BUT FED has to keep dropping…see 1year Treasury below.

3.6 on 1 year factors 2 drops…or 4.3-3.66 = 0.64%

TLT now a bull with 6 days above 200dma…like June last year. MINI-RUN now complete.

AND TLT to SPY closer to cross…

This policy leads to spiraling inflation and crashing economy.

OF COURSE, the only way to crush the inflation is to have a recession and deflation.