Today, the Consumer Price Index numbers were released for the month of November. They showed the fastest increase in the inflation rate since 1982, especially in food and gas prices. These price increases directly hit the wallets of consumers.
Most pundits were predicting lower inflation. They predicted that the combination of Omicron fears and a lack of spending would reduce demand, and reduce the amount of money in the economy. If you listened to them, you were unprepared for what actually happened.
If only you had known that inflation was going up; you could have bought groceries before prices rose, or reduced your investments in stocks hit hard by inflation.
There's only one place where you could have gotten fully accurate predictions of inflation. Luckily for you, that same place allows you to directly hedge a large increase in inflation. On the Kalshi CPIR2 market, traders predicted an 81% chance that the November monthly inflation would be above 0.6%, and a 26% chance it would be above 0.8%.
Where was it? Exactly 0.8%. The market, despite all the uncertainty surrounding inflation, was priced to perfection. Traders in this market were able to prepare for higher inflation because they had highly accurate forecasts. Not only that, these forecasts were consistent. The graph below shows the probability, over time, that the CPI rises more than 0.6% in November: it's almost constant. If you bought YES on inflation being above 0.6%, you would have been rewarded with cash, which is more than can be said for noisier financial instruments.
Want to get involved? You can find future inflation markets at kalshi.com. You’ll also find markets on the unemployment rate, the price of gas, the rate of real GDP growth, and all the other economic indicators that affect your portfolio. Kalshi.com is the only place that gives you unbiased forecasts of these indicators, and allows you to hedge, and make money, on them directly.