Tide Is Turning In Stocks And Gold

Friday‘s session ended in a tie, but it‘s the bears who missed an opportunity to win. Markets however dialed back their doubting of the Fed, which has been apparent in the long-term Treasuries the most. One daily move doesn‘t make a trend change likely though, especially since the Mar pace of TLT decline is on par with Feb‘s and higher than in Jan. While Treasuries paused in early Mar, they‘re now once again as extended vs. their 50-day moving average as before.

And that poses a challenge for interest rate sensitive stocks and to some degree also for tech – while I expect value to continue to lead over growth, technology would recover some of the lost ground on rates stabilization. And it‘s true that the $UST10Y move has been a very sharp one, more than tripling from the Aug 2020 lows.

Inflation expectations are rising, and so is inflation – PPI under the hood thus far only. Financial assets are rising, perfectly reflected in (this month consolidating) commodity prices. Cost-driven inflation is in our immediate future, not one joined at the hip with job market pressures – that‘s waiting for 2022-3. The story of coming weeks and months is the stimulus avalanche hitting while the Fed still merrily ignores the bond market pressures.

And stocks are going to like that – with tech participating, or at least not standing too much in the way, S&P 500 is primed to go to new highs rather shortly. Given the leadership baton being firmly in the hands of value, smallcaps are likely to outperform the 500-strong index over the coming weeks and months. The volatility index is confirming with its general downtrend, commodities, including oil, will be the 2021+ place to be in – just see how fast is Thursday‘s steep correction being reversed. I‘ll be covering black gold more often based on popular demand, so keep your questions and requests coming!

The precious metals upswing goes on, and landed the yellow metal comfortably above $1,740. Not too spectacular, but the miners are still painting a bullish picture. I view the increasing appeal of the yellow metal (alongside the bullish sentiment hitting both Wall and Main Street) as part of the inflation trades, as decoupling from rising yields which increased really fast.

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Monica Kingsley 3 weeks ago Author's comment

Midway to the US session update: stocks keep doing great, bullish signs persisting, and the gold upswing continues in consolidation mode. Bond markets have calmed down today, and commodities keep treading water with the exception of copper. So far so (very) good today!