Inflation Coming Without Gold?

US small cap stocks continue to show amazing relative strength and over the last six months and is one of the best performing stock indexes, up over 31%. The Small Caps were outperformed during this period by only South Korea and Taiwan, two countries that navigated the Corona Virus most adroitly.

Most noteworthy is that the sell-off in Gold defied inflationary moves in energy, industrial metals, and soft commodities. This shows markets believe that geopolitical stress is under control despite some subtle background noise such as the killing of Iran’s top nuclear scientist …  allegedly by Israeli agents according to Iran.

An unruly transfer of power in the US is underway, but markets (gold especially) do not seem to notice or if they do, they don't care.

The highlights of this week’s market action are the following:

  • Risk gauges remained green across the board and most risk metrics improved
  • Small Caps (IWM or Grandpa Russell) improved its current leadership over the other US equity benchmarks, up over +4% for the last five trading days
  • Energy markets led by clean energy (PBW and TAN), indicating the economic recovery from the virus will continue
  • Volume patterns show a neutral reading
  • The sentiment (VXX) turned long term bullish
  • Value Stocks are holding their recent breakout versus the S&P500
  • Gold defied the rally in commodities and broke down under key levels we mentioned last week although oversold short term
  • Commodities and Emerging Markets led by Latin America continue to add to excellent performance
  • Grandma Retail (XRT) was up over 6% for the last 5 days defying the lockdown in many states and one of the best performing sectors after clean energy

Video Length: 00:10:39

 

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