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| By Sean Brodrick |
The Bureau of Labor Statistics delivered a major shock to the markets when it released the April Producer Price Index (PPI) report last week.
Wholesale inflation surged by 1.4% month over month, pushing the annualized headline PPI to 6.0%.
This is the highest annual rate since December 2022, signaling that massive price pressures are building at the front end of the supply chain.
We find the biggest jumps in the usual suspects — gasoline up 15.6%, diesel up 12.6%, jet fuel soaring a whopping 36.4%.
But you know what? You ain’t seen nothin’ yet.
Much higher prices for consumers are yet to come.
Let’s start with the fact that consumer prices lag producer prices by a few months.
The latest Consumer Price Index (CPI) report, released by the BLS on May 12, 2026, shows that headline inflation rose to 3.8% year over year for April.
In other words, that 6% jump in producer prices hasn’t worked its way through the system … yet.
Inflation Déjà Vu Is Coming for You
How do we know that will happen? Because it’s happened before.
Let’s look at 2021, the LAST time that PPI jumped up through 6% …
You can see that back in 2021, PPI hit 6% in May and kept on trucking higher, finally peaking at 11.7% in March of 2022.
But CPI didn’t hit 6% until October — five months later. It peaked at 9.1% in May of 2022.
What fueled that rise in 2021 was the pandemic.
Sure, Covid struck early in 2020, and the FDA authorized the first Covid-19 vaccine (Pfizer-BioNTech) in December of 2020.
But the effect on global supply chains lagged and didn’t really hit until 2021.
Then, global lockdowns led to factory shutdowns, port congestion and a scarcity of shipping containers and microchips.
Industries, including auto manufacturing, could not produce enough goods to meet soaring demand.
At the same time, as global economic activity resumed, demand for petroleum and energy skyrocketed.
Hey, skyrocketing energy prices! Does that sound familiar?
Finally, massive government relief packages such as the American Rescue Plan injected significant disposable income into the economy.
People had money and wanted to buy stuff, driving prices higher!
What About This Time?
This time around, we have new drivers (tariffs) alongside the old ones (energy).
President Trump slapped tariffs ranging from 10% to 41% on all our trading partners starting in April of last year.
That drove the average effective U.S. tariff rate to its highest level (27%) since 1947.
And that’s important because while producers bore those tariffs for a while, eventually the makers of goods passed the price hikes on to consumers.
President Trump added another 10% tariff this past February, which triggered more price hikes.
Then, we have the war with Iran, the subsequent blockade of the Strait of Hormuz and price hikes in everything from oil to helium to aluminum to fertilizer inputs.
So, let’s look at what’s happening with PPI and CPI now …
Price hikes hit producers hard in April.
CPI is still “just 3.8%”. But those high PPI prices will work through the pipeline.
What Should You Do?
I like keeping a large amount of cash in the bank, because I’m an old grump. That’s a stupid thing to do now.
When higher inflation is structurally baked into the pipeline, a standard cash-heavy position becomes a guaranteed wealth destroyer. Regular bonds, too.
So now, I’m looking for assets with intrinsic value, pricing power and linked to rising prices.
Interestingly, stocks — at least the right ones — will do very well in inflationary environments.
That’s because stocks of companies that hold real assets will tend to go higher in inflationary times.
Say Hello to HALO
I’ve been preaching the value of Heavy Assets, Low Obsolescence (HALO) stocks to my premium subscribers for some time.
Companies with capital-intensive, physical assets that cannot be easily replaced — AND that can pass 100% of their rising input costs on to consumers — can do very well.
I’m talking about energy and critical materials, precious metals, utilities and infrastructure.
And I’m prioritizing companies with positive free cash flow and debt they don’t have to refinance anytime soon.
Let’s look at the State Street Energy Select SPDR (XLE).
It’s stuffed with U.S. oil and gas companies across exploration, production, refining, pipelines and oilfield services.
Its top three holdings are Exxon Mobil (XOM), Chevron (CVX) and ConocoPhillips (COP).
The XLE carries a very low expense ratio of 0.08% and offers a dividend yield in the 2.5% to 2.7% range.
Let’s look at a chart …
You can see that the XLE is trying to break one level of overhead resistance. Then it needs to break out through the high it set right after the war with Iran started.
I believe it’s going to do that, then run to $105 … and maybe higher.
What’s that you say? Peace will come to the Persian Gulf soon, and the blockade of the Strait of Hormuz will end?
Sure, sure. How many weeks have we heard that?
Heck, even if peace breaks out tomorrow, a lot of infrastructure got blown up around the Persian Gulf.
Oil prices will probably be feeling upward pressure all year.
That’s more to stoke inflation … inflation that is already working its way through the system like a pig through a python.
Higher prices are coming.
Prepare for it now, if you want to sleep at night and not worry about inflation taking a bite out of your wallet.
All the best,
Sean
P.S. Another way you can combat inflation creeping up towards 6% or 7% again is to find investments that pay even more income.
My colleague, Nilus Mattive, just unveiled his strategy that does exactly that. But you need to watch how it works today if you want to use it for yourself.
