The Inflation Tsunami About To Hit

Stocks went on to push higher yesterday – the pressure is building. Trends in place since last week, remain in place for this earnings rich one too. Reflation still rules, reopening trades are well underway, and inflation expectations are modestly turning up again without putting too much strain on the Treasury markets.

While Monday wasn‘t an example of a risk-on day, the markets are clearly moving there:

(…) overpowering the USD bulls yet again as the dollar bear market has reasserted itself. It‘s not just about EUR/USD on the way to its late Feb highs, but about the USD/JPY too – the yen carry trade is facing headwinds these days, acting as a supportive factor for gold prices. While these went through a daily correction, commodities pretty much didn‘t – lumber is powering to new highs, agrifoods didn‘t have a down day in April, copper and oil scored respectable gains. The market is in a higher inflation environment already, and it will become increasingly apparent that commodity-led inflation is here to stay.

Yesterday was a great day for commodities again as these scored stronger gains than tech or $NYFANG, the main winners within the S&P 500 (defensives took it on the chin – seems like we‘re about to see rates move higher again). Anyway, VIX didn‘t object as options traders piled into the clearly complacent end of the spectrum again. Both the Russell 2000 and emerging markets loved that – the best days for smallcaps are clearly ahead:

(…) the time of their outperformance, is approaching.

Gold miners didn‘t outperform the yellow metal yesterday while silver did – are the ingredients for a metals‘ top in place? I don‘t think so, and have actually called out on Twitter the GDX downswing as likely to be rejected and ending with a noticeable lower knot. And here we are. No changes to my Friday‘s thoughts that:

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