If seasonality is any indication, potentially another rocky month for stocks.
Plenty of new supply coming to market in the form of SPACS:
3 asset classes that are generally considered ‘safe havens’:
In fact, the 10yr is a strong conviction to move to 1.6% and possibly even higher. We know that foreigners have been dumping Treasuries for quite some time. There are (apart from the Fed.) no buyers currently. Hence the move lower. For the moment at least, that will continue. If/when the 10yr enters the 2%-3% range, I think the stock market has issues. We have seen already last week, just how quickly the stock market will react to negatives in the Bond market. Nothing in the Bond market currently is going to improve: therefore the stock market is likely to become very choppy and somewhat directionless, ie. the trend higher will become bogged down.
Gold is positioning for a comeback. It’s not there yet, but it is getting close. I think 1 more decline and we will hit the inflection point for a bounce higher. I’ve been working on my ‘gold’ models, so we’ll see if there is any validity to them. Generally, the miners outperform gold itself (up/down) and I would expect this to hold true due to their natural leverage. The smaller miners more than the majors. So I’m getting ready to take profits in the shorts and get long. Not there yet, but close. Obviously, this implies that ‘something’ will happen in Treasuries. I think it will. I don’t think the Fed. can or will let rates across the longer end of the curve (10yr-30yr) continue to rise. They will increasingly cap them, whether covertly or overtly. If they do…gold will be the tell: it will reverse fast and hard.
Now assuming that the Fed. does cap rates, what about stocks? Well commodity based stocks should continue really strong, capping is highly inflationary. Growth stocks (Tech) should catch fire again. Financials will probably sell-off. Housing based stocks should catch fire.
Now this is pretty old news. Newer (stupid) investments constitute video clips of NBA games. Baseball cards have been collectible for decades and are again on fire, but this video clip thing is a few months old.
So in summary: I am less enamoured of stocks currently. I am preparing for gold.
jog on
duc
Be the first to comment