Two Worlds of Inflation Worries By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - Be wary of partisan sentiment surveys…
- The market might be flipping into a bull trend…
- The latest Quantum Edge hotlist…
- Forget the “Mag 7,” here comes the “MAGA 7”…
Consumer sentiment surveys have a big problem… And that problem isn’t that they make for great fear-baiting headlines out of the mainstream press. You may have opened up Bloomberg or The Wall Street Journal on Friday and saw that the University of Michigan Consumer Sentiment Survey was continuing to deteriorate. And that might have you scared. Here’s the word from Bloomberg: The final April sentiment index fell to 52.2 from 57 a month earlier, according to the University of Michigan. While a slight improvement from the preliminary gauge of 50.8, the latest figure is the fourth-lowest in data back to the late 1970s. Consumers anticipated inflation will rise at an annual rate of 4.4% over the next five to 10 years, the data out Friday showed. They expect prices to rise at a 6.5% pace over the next year. While down from a preliminary reading of 6.7%, year-ahead price expectations are still the highest since 1981. That’s dire. Consumers are more pessimistic today than they were at the depths of the Great Financial Crisis, when the index bottomed just over 55… Wait, what? Yes. During a time when countless people were losing their homes and the stock market was more than 40% off the highs, people were more optimistic than they are today… We’re in an on-again, off-again trade war and are seeing some considerable stock market volatility. But somehow this doesn’t seem quite like a Great Financial Crisis. At least not yet. That might sound a bit screwy to you. It does to me. And so does the inflation expectations – a 6.5% rise over the next year would represent a colossal failure in the Federal Reserve’s fight to get inflation in check. So let’s look under the hood of the UMich Sentiment Survey a bit. Specifically about who is answering this survey. | Recommended Link | | | | You won’t believe what Elon Musk is hiding… Inside this facility in the middle of an industrial zone of Memphis, right next to a decommissioned coal plant. Click here to see what's inside… Because it could make a lot of people wealthy in America. |  | | Research out of Goldman Sachs recently highlighted the flaws in this very popular survey. For one, the survey is conducted on a group of about 600 to 1,000 people. Where it used to be phone-based, it’s now filled out online. So we’re dealing with a small sample size and a generally low standard of accountability – it’s much easier to express extreme opinions in a web form than it is to a person on the phone. Next we should look at the composition of respondents. This chart from Goldman Sachs reveals something about the latest trend of poor sentiment and high inflation expectations: 
So we might be seeing some partisan thinking in these responses. There are more Democrat respondents than any other party affiliation, and Democrats constitute more than 42% of the survey. Republicans, meanwhile, are only about 25%. And drastically fewer respondents identify as “Independent” than a couple of years ago. Finally, there’s the issue with inflation expectations themselves. Respondents can input any number between 0.1 and 100 in response to the question of how much they expect prices to rise on a percentage basis. This invites more extreme readings, and could explain why the averaged-out number shows such extreme inflation expectations. Put all these factors together, and you have a very good source for the sudden swing in sentiment from this headline survey: 
Now, I know this isn’t exactly what you call great trading guidance. Don’t worry, we will have that for you shortly. But when I saw these numbers come in Friday, I quickly remembered this research from Goldman Sachs and realized how few people likely understood that these big-deal surveys are inherently flawed and should be taken with a pinch of salt. The reality is, most people are not terrified that we’ll see 6.5% inflation in the next year. And they’re not as pessimistic about the economy as they were in 2008. And because of that, you shouldn’t interpret these extreme readings as a reason to be pessimistic yourself. Especially when so many stocks are on hot win streaks right now… Markets have been a lot less choppy lately, with the Friday move in the S&P 500 taking it just below the high of the April 9 “90-day pause” surge. 
This might be the start of a new uptrend. If SPY can flip this $549 level and retest it in next week’s trading, it’s a good sign we’ve seen the worst of the tariff-driven downturn. But so long as there are stocks out there that outperform the market – and there always are – that’s where our focus should be. Our own Jason Bodner developed the perfect system to find market-leading stocks. In the past, it’s tapped into little-known small- and mid-cap names that go on to post market-beating returns. This system ranks each stock based on two Power Factors: - Superior fundamentals – stocks with the best growth rates in sales, earnings, and profit margins
- Strong technicals – stocks in bullish price patterns with the volume signals only possible with the help of big institutional buying
While Jason’s Quantum Edge Pro subscribers wait for the new top 10 to release this afternoon, let’s look at last week’s list below… 
Alamos Gold (AGI) and Royal Gold (RGLD) remain the top-ranked names this week, tied with Quantum Scores of 84.5. It’s a clear signal that gold continues to draw Big Money attention. Also holding strong are ADMA Biologics (ADMA) and Rollins (ROL), both making repeat appearances with balanced growth and momentum. Newcomers Catalyst Pharmaceuticals (CPRX) and MercadoLibre (MELI) are worth watching too, as they break into the top 10 with strong showings. On the other side, Cohu (COHU), SoftBank Group (SFTBY), and Syndax Pharmaceuticals (SNDX) sit at the bottom once again – these are names the Big Money is clearly avoiding. In other words, don’t sleep on gold… But there are also a lot of great buys that aren’t getting wall-to-wall media coverage right now. That’s where Quantum Edge really shines, so be sure to check out Jason’s strategy, which you can do at this link. Luke Lango thinks a new “Magnificent 7” will be crowned this month… Remember when the Magnificent 7 stocks were in such hot demand, it amounted to a “buying panic”? They were the only seven stocks anyone wanted to talk about, over and over. Practically begging for the talking heads on TV to assign them a catchy nickname… Which, of course, they did. Well, now we could be headed for another buying panic. Cash is building up on the sidelines – i.e., in money-market funds – to the ridiculous extreme of over $7 trillion. As soon as investors feel they have the green light, much of that money will flow into what Luke Lango has affectionately dubbed the “MAGA 7.” These seven companies are U.S.-based… But, most importantly for our purposes, they’re poised to benefit the most from the biggest opportunity of our lifetime: Artificial intelligence. At TradeSmith, as you surely know, we couldn’t be any more bullish on AI. So, I can’t wait to see what Luke’s Silicon Valley-based research team has for us over at InvestorPlace. To be there when Luke’s ready to hold his free 2025 Summer Panic Summit, click here to automatically reserve your seat. To your health and wealth, 
Michael Salvatore
Editor, TradeSmith Daily | 
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