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Our hearts go out to the people impacted by the wildfires in Los Angeles. The human cost has already been staggering, with at least 24 dead and as many as 100,000 forced to flee their homes.
We don’t yet know the final financial toll, but as traders, we can already see signs in the market. The potential clean-up and rebuild will cost, and the tape reflects this inflationary reality.
Today, for instance, was marked by rising energy prices and strength in materials and construction equipment. At first look, oil prices have been setting up for a breakout for a while, but something seems to have changed.
We’ve already seen bullish conditions for energy, but beyond that, stocks like Caterpillar (CAT) and John Deere (DE) are breaking out today. We’re seeing relative strength increase in steel companies like Cleveland-Cliffs (CLF), too.
With rising materials and energy prices, the inflation monster is becoming more fierce and bonds are definitely worse for wear.
The big question facing traders is whether the destruction-induced economic drag will sink us further into a stagflationary abyss.
As the market weighs the possibility, look for market performance to diverge, revealing the haves and have-nots.
Tonight we’ll look at how to fall in with the haves…
