Gold And Stock Bulls Are Getting Ready

Now that stocks closed at new all-time highs, the correction is officially over. And what little rest stock bulls could claim last week, arrived on Friday. Yet, the bull is strong enough to defend the 3,900 zone, and charge higher the same day.

Who could be surprised, given the modern monetary theory ruling the economic landscape? The Fed amply accomodative, one $1.9T stimulus bill just in, and a $2T infrastructure one in the making. That‘s after the prior Trump stimulus, and who would have forgotten how it all started in April 2020? The old congressional saying „a billion here, a billion there, and pretty soon you‘re talking real money“, needs updating.

Stocks are readying another upswing as the volatility index is approaching 20 again, and the put/call ratio shows complacent readings. The sectoral examination supports higher highs as tech has reversed intraday losses, closing half of the opening bearish gap. Value stocks naturally powered to new highs, with industrials, energy and financial performing best. Real estate keeps showing remarkable momentum, and has been among the best performers off correction‘s lows.

These all have happened while long-term Treasury yields have broken to new highs. Are they stopping to be the boogeyman?

As I‘ll show you, inflation expectations are rising – and the bond market is reflecting that. The market‘s discounting mechanism is at work, mirroring the future virtually ascertained CPI rise, if you look carefully into the PPI entrails. This inflation won‘t be as temporary as the Fed proclaims it would – but it still hasn‘t arrived in full force. We‘re merely at the stage of financial assets rising, because that‘s where the newly minted money is chiefly going.

As regards gold, let‘s recall my Thursday‘s words:

(…) At the moment, evaluating the strength and internals of precious metals rebound, is the way to go as we might very well have seen the gold bottom, with the timid $1,670 zone test being all the bears could muster. Time and my dutiful reporting will tell.

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Monica Kingsley 4 weeks ago Author's comment

Stocks are meandering today amid non-disruptive outside #markets - smallcaps and emerging markets say so too. Weaker HYG isn't about to pull $SPX down, and talking downswings, I'm not looking for one to start in the metals, in spite of earlier selling into strength. The gold, silver and miners upswing is still unfolding.