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Markets are in a summer doldrum, some risks on the horizon and a re-shuffling of what's been working on the inflation trade. Will the economy continue to grow on its own or the monetary/fiscal stimulus will be back on the table.
Despite hitting all time highs this week, under the hood the market is in pretty rough shape and being mostly propped up by a handful of big tech stocks as we head into the heart of earnings season.
We're seeing the value/energy/commodity sector sell off bigly the last week or so, including another big down day in many stocks across commodities.
All in all it's really been a tough week outside the big tech companies and even then seem to be cooling off today a bit.
Just wondering how the exchange is looking at these moves. Just a stalling of the value trade that will kick back in once we get out of the summer doldrums? Or much more pain to be felt as the big tech stocks continue to outperform? Or will it just be a big market drop in the coming weeks as we head into August and the momentum peters out and overbought big cap stocks sell off and bring the whole market down?
For me its tough to see my core long-term holdings in energy, PMs & commodities get hit really hard day in day out. I really am a believer in the commodity inflation thesis, so am holding the course and nibbling on some of these stocks (e.g. bought a little BTU, NGD, PBF and WDOFF on weakness today) but hard to have conviction here at least in the short-term. Still I'm not selling as I firmly believe in the longer-term (i.e. next 3-5 year)... (More)
I am outlining here sign posts you should be looking for that might turn the tide from disinflation to inflation. I will summarize what each macro thinker is looking for:
- Russell Napier: Russell believes that governments will mandate credit rations to the commercial banks for political goals. These political goals are reducing inequality, fighting climate change, favoring small business over big corporates, and the shift from return on capital to the return on labor. He expects money growth to grow on average 10% year over year. He expects inflation will be around 3% to 5%. He expects central banks (including the FED) to be compliant to government wishes. Examples: A) In the UK, usually the longest term fixed mortgage you could normally get was five years. Prime minister Boris Johnson has now created a 25 year fixed mortgage for first-time buyers, offered by banks, guaranteed by the government. B) Bank of Japan has mandated that commercial banks lend at 0% for climate change related lending. C) In the US watch for student loan forgiveness and other social programs for millennials. He expects government bond yields to stay low through central bank purchases and mandating financial institutions to buy more of government bonds. In another words no more free markets. So Raoul Pal's chart of truth turns into the chart of deceit!
- Russell Clark: Russell is following China closely. What he is observing is that China is already attempting to have policies that favor wage growth and the return on labor... (More)