We’re about to wrap up the second week into a new year. 

And there are already some exciting market trends begging to set in.

This week, I sat down with my colleague J-Rod for a rapid-fire rundown of everything you need to know about this new season in the stock market.

We covered a recent report showing record rates of inflation…

Why the job market is speeding up already-rising prices of both goods and services…

And how you should adjust your investment philosophy to profit from rising interest rates this year.

Click the video below for all the details.

Video Notes:

#1: Inflation

• The CPI report showed that inflation is up 7% for the year - the highest its been since 1982.

• Core inflation, which includes necessities like food and energy, is up 5.5% - its highest since February 1991.
  
  
• Small business owners are reporting inflation as their single-biggest problem and it’s driving the cost of employment index higher.

• A Bloomberg and JPMorgan study showed that passive index investing is a bad strategy during periods of high inflation.

• We’re entering a stock-picker’s market. If we’ve seen anything this past year, it’s that stocks are going to disconnect from the broad market and trade on their own merits.
  
  
• That’s great news for us - we’ll get more profits from paying attention to the best-performing stocks. And if you’re on this call, it means you’re one of the investors who actually cares.
  
  
• Seasoned investors are back in the room while new Robinhood traders are being forced to settle down. Bottom line: it’s a great time to make money by making smart decisions.

#2: Job market

• A recent report indicated that 23% of people intend to quit jobs this year to look for higher pay.
  
  
• The survey also showed that people who work from home are more likely to quit. So service companies are the ones that have to pay more to keep and hire employees.

• This goes back to the inflation argument. It’s not just the price of goods rising because of bottlenecks.

• Services are also going up because companies have to pay workers more.

• Inflation is still rising above pay increases. People will need to be paid more to buy the same things. 

• So expect wages to continue to rise. Again, we’re starting to have more of a vicious cycle. 

• It’s even more important now for you to protect your wealth. And you have to be proactive about it.

#3: Interest rates

• The bond market is finally starting to adjust to changing interest rates. The 10-year note is at 1.73% - could it go to 2%... 3%... or even more?

• Remember, this affects your bonds, target-date funds and more.

• Don’t let your retirement account stay in cruise control. Remember that passive investing strategy? Don’t do it!

• Higher rates are causing a massive shift – the rocket engine switch we talked about last month. 

• No earnings and low earnings stocks are still very dangerous.

• Some days will be good, but that’s only a chance to unload. Or if you’re an active trader, you could even buy puts!

• Good earnings companies (including blue-chip tech stocks) will do well…very well… in this environment.

That’s what’s on my radar for now. But before I sign off, I’d just like to reiterate one point…

Don’t be an indexer; be a stock picker.

Indexers simply buy things like the S&P 500 whereas stock pickers select the specific stocks that will outperform the broad market during a turbulent season.

Now is hands down the time to be a stock picker. And we’ll continue to share our favorite plays here in our daily alerts.

Here's to living a Rich Retirement,

Zach Scheidt
Editor, Rich Retirement Letter
RichRetirementFeedback@StPaulResearch.com