Is Inflation Coming?

 

  1. The market is revising its Fed policy expectations by pricing in hikes earlier than what the Fed has communicated. This is creating a communication challenge for Powell and will eventually lead to increased market vol and/or force the Fed to make some changes to its messaging (chart via GS).

 

  1. With slightly above-trend inflation coming, it may soon be time to revisit precious metals, which have been hammered over the last 6-months. Only 12% of gold miners are trading above their 200-day moving averages currently. Breadth this bad tends to precede bottoms (GDX).

 

  1. Conversely, breadth in semis remains incredibly strong, especially considering the broader market action over the past few weeks (SMH).

 

  1. I shared this chart months ago making the point that we’d likely seen the bottom in DRAM prices for the cycle. (DRAM) has gone vertical since and with the industry’s secular tailwinds, this trend is only getting started… You can read our secular bull semiconductor & MU thesis here.

 

  1. We continue to like the housing sector at MO. Cavco Industries is an interesting play on this theme. The company produces manufactured homes as well as providing financing. Its chart is a beaut with the stock breaking out of a 3-year wedge (CVC).

Collective members can find the bullish housing report we wrote up last year in the library.

Stay safe out there and keep your head on a swivel.

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Disclaimer: All statements are solely opinions and are for educational purposes only.

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