Small-Cap Value Set To Outperform

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  1. A lot of value plays are dependent on rising commodity prices. And commodity prices are dependent on the US dollar, which I expect to trade lower over the coming year(s) — although, I’m still looking for that tradeable bounce!

A big part of my dollar bear thesis is the end of Core Domination and a reversion in capital flows from the highly crowded US equity market, back out to the periphery. The chart below shows that US stocks are near an all-time record high as a share of the MSCI global index.

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  1. The USD bear thesis is broadly supported by the relative growth outlook as well. (chart via Nomura).

  1. But I wonder if relative COVID trends begin to affect the FX majors at all. If you watch the mainstream media, you wouldn’t know it but the relative trends in daily cases are much worse in Europe than they are in the US as of late.

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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