• On paper, Amazon (AMZN) appears to be a no-brainer due to “new normal” dynamics.
• However, inflation continues to be a problem for AMZN stock and other investments.
• It’s best for prospective buyers to wait out the next few sessions.

For the first two years of the coronavirus pandemic, Amazon (NASDAQ:AMZN) has been a clear winner, but questions about its ability to maintain its dominant profile have popped up. Particularly, AMZN stock appears to have trouble sustaining key technical levels. And when this occurs for a high-profile blue-chip company like Amazon, fundamental headwinds may be at play.

Of course, if you merely look at circumstances from a bird’s-eye view, the situation for AMZN stock seems more bullish than anything. For instance, the underlying e-commerce platform was a clear beneficiary of the new normal — the name associated with post-Covid-19 realities. With people concerned about getting infected with the mysterious SARS-CoV-2 virus, online transactions received a massive boost.

Indeed, at the peak of societal fears, e-commerce as a percentage of total retail sales hit 15.7% in the second quarter of 2020. Although AMZN stock wasn’t the exclusive beneficiary of this consumer behavioral shift, it was among the most profitable thanks to Amazon’s incredible brand awareness and footprint. Even though this allocation toward e-commerce has declined since then, the metric is considerably more elevated compared to pre-pandemic norms.

Still, this might not be enough to save Amazon stock, at least for the interim. As powerful as the company is, it appears to be no match for the Federal Reserve.

Inflation and the Uphill Battle for AMZN Stock

You don’t need to be an economist to recognize that something is very wrong: A quick trip to the gasoline station will tell you that immediately. On a personal level, I almost spent a Benjamin filling up my tank — a first by a country mile.

While there’s plenty of blame going around in the media, what sometimes gets overlooked in the partisan battlefield is the dramatic expansion of the real M2 money stock. On a month-over-month basis in April 2020, the money stock expanded by 7.2%, the greatest magnitude on record. For context, the previous record was in December 2008 at a bit over 3%.

Based on where AMZN stock is today relative to where it was during the doldrums of 2020, however, it appears that Amazon has somehow avoided the negative implications of this money stock expansion. But this dynamic could be stemming from overexuberance by Wall Street.

To be sure, you can point to data such as advance retail sales in the broader retail trade, which rose 18% between 2020 and 2021. Specifically, you can point to sectors such as the retail furniture subsegment, which expanded dramatically from both 2020 and pre-pandemic norms.

But it’s also possible that certain sectors, such as housing, are benefitting from one-off catalysts. For instance, the jewelry segment declined between 2019 and 2020. As well, when you consider the clothing and fashion accessory segment, you’ll notice that the combination of 2020 and 2021 sales is conspicuously lower than the combo of 2018 and 2019 sales.

In other words, inflation may be slowly taking its toll on discretionary consumer spending. This in turn may bode poorly for AMZN stock.

Technical Rumblings Pose a Warning for Amazon Investors

In my estimation, the only practical solution to get consumer prices back to the “old normal” is that the Fed must address the money stock problem. We can see in hindsight that injecting cash into the financial system only caused the free market to respond in kind.

Yes, it’s easy to point to politicians, parties and private-equity firms as culprits. However, without the expansion of the money stock, it’s difficult to imagine the sharp increases in certain sectors, such as real estate. Because of the crippling nature of soaring inflation, institutional firms saw little choice but to protect their wealth through investments. We see the result in ridiculous housing costs.

But that also poses downwind problems for investments like AMZN stock. The money supply increase didn’t just affect housing but almost every product and vital service. Therefore, we see in the underperformance of discretionary categories such as jewelry and fashion that consumers are tightening their belts. That’s not conducive for Amazon’s forward progress.

On the charts, AMZN stock is struggling around the $3,300 level. Based on a rising trend line that began in July 2020, shares arguably should be trading around the $3,500 level — and that’s the baseline. For driving confidence, AMZN should really be attacking the $3,800 level.

Wait for a Few

Given the lack of momentum in AMZN stock, I believe the best idea for prospective buyers is to wait for a few sessions. Let the security provide a clearer picture of its potential forward trajectory before making a significant move.

That’s not to say that Amazon is a bad investment. On the contrary, it’s a very powerful entity. However, its recent technical downturn forces all of us to consider the fundamental backdrop. Unfortunately, a deeper look reveals that not everything is well with AMZN, forcing a cautionary approach in the interim.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.