Tax day. There’s no more pernicious tax than inflation in your own currency.
The stock market follows consumer price inflation (CPI) for its headline inflation. The Federal Reserve targets producer price inflation (PPI).
Those measures often move in lockstep, but right now, producers are getting the squeeze:
Core PPI less Core CPI is rising – a trend that has typically marked a resurgence in inflation that has preceded a market downturn. (Source: @yieldsearcher via X)
As Dr. Mark Skousen explained in our Grey Swan Live! conversation last Thursday, producers dealing with both inflation and tariff burden saw the broader measure of gross ouput (GO) go negative in fourth-quarter 2025.
In past periods where core PPI has soared over CPI, producers have faced margin pressures. And when that happens, it tends to result in poor margins, earnings misses and a sell-off in the stock market.
The prior two spikes in PPI against CPI occurred in late 2021, going into the 2022 bear market. And in mid-2008, amid soaring oil prices ahead of the Great Financial Crisis.
The S&P 500 Index closed at a near-historic high again yesterday. Earnings season is about to kick off again. As an investor, pay attention to the impact of new inflation data on corporate balance sheets, especially the PPI.
And… keep your eyes peeled for Shadow Stocks – volatile stocks that move rapidly up and down beneath the surface of the calm indexes. Earnings season is a ripe time for cherry-picking stocks.
~ Addison
P.S. Last week’s Grey Swan Live! with Dr. Mark Skousen yielded a romp through political and economic “liberty” from the signing of the Declaration of Independence and the 25o-year anniversary of Adam’s Smith’s Wealth of Nations – with a strong detour through the renaissance accomplishments of Benjamin Franklin – all the way to Elon Musk and the entrepreneurs leading the U.S. economy into the AI and space age.
You can watch the replay of Grey Swan Live! Mark Skousen in the members section of the Grey Swan website. If you’re not already a member, click here to join our latest livestream.
