I am posting here two charts from Bridgewater that explain how someone can allocate to equity sectors based on what you think the macro outlook is:
The chart above says the following:
- If you believe that we will not have rising rates of economic growth with no rising rates of inflation and ample liquidity, you should invest in Hi-Tech especially software. This is Raoul Pal's thesis.
- If you believe that we will have a rising rates of economic growth environment with inflation with no ample liquidity you should be investing in value stocks and the resource sector.
The charts above compares the performance of Tech in 2020 versus value and resource sector in 2021. In 2020 we had the first condition (point number 1) and in 2021 we had the second condition (point number 2).
As investors we need to determine which macro environment we will be in for the next few years. Is it point number 1 or point number 2? This gets tricky for two reasons: A) Government fiscal policy and B) The FED will never stop QE. Julian Brigden's thesis is centered on point number 2 due to fiscal policy and he also believes we will get yield curve control which is another way of saying shit loads of liquidity. In this environment you load your truck with commodities, gold and gold miners.
How this impacts Bitcoin I do not know. I am still trying to assess how the market is assessing bitcoin? If it is an... (More)