Anything the Federal Reserve mentions regarding inflation could move the markets, and traders quickly found that out during Monday’s trading session as U.S. Fed Chair Jerome Powell mentioned that inflation is “too high.”
In front of the National Association for Business Economics, Powell was more candid with respect to his remarks regarding inflation.
“The labor market is very strong, and inflation is much too high,” he said.
Unfortunately, this snapped a winning streak for the Dow Jones Industrial Average, as it fell 200 points. Powell’s inflation remark comes after the Fed just raised the federal funds rate by 25 basis points.
Even after he offered a sliver of hope that the Fed would do what’s necessary to stave off the effects of inflation, it couldn’t save the equities markets.
“We will take the necessary steps to ensure a return to price stability,” Powell added. “In particular, if we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”
An Inflation Hedge Play on Gold Miners
Gold has been strong out of the gates for 2022, and traders can get an ancillary play on the precious metal with miners. More specifically, if they want to lever up on their trades, they can use the Direxion Daily Gold Miners Bull 3X ETF (NUGT ).
NUGT, which is up over 30% for the year, invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse or short leveraged exposure to the index equal to at least 80% of the fund’s net assets. The index is a modified market capitalization-weighted index comprised of publicly traded companies that operate globally in both developed and emerging markets and are involved primarily in the mining for gold and, to a lesser extent, silver.
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