Reflation vs. Stagflation – ValueWalk


The S&P 500 didn’t give in to the opening weakness and made minor gains. There was also no sell at the close – the table looks set for the confusion to continue on Monday. Technology and value – interest-free that day, and the same could be said of the credit markets. Rising yields (the market believes in typing, it seems) across the board, high yield corporate bonds hold up much better than quality debt instruments – I really saw constellations of risk stronger.

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Importantly, the huge weekly jump in Treasury yields (the 10-year yield jumped more than 20 basis points to 1.47%) failed to push the dollar higher, making it says a lot given the risk-free entry of the week. Meanwhile, the Fed’s jawbone continues, and the bigger picture leaves the ambitious suspect in November.

At the same time, the Fed’s foot is to a large extent on the accelerator, and even global liquidity is shrinking. New taxes come into force, labor market problems persist, inflation isn’t going away anytime soon, struggling supply chains are forcing globalization to reverse, workforce shrinking, growth GDP is slowing and no new tax initiatives are on the horizon – looks like a recipe for stagflation.

As I wrote on Friday:

(…) The post-Fed relief just took the bears for a walk, and the Yuan Evergrande bond repayment calmed nerves. As if the real estate industry is universally healthy – I think copper prices and the BHP share price tell a different story. Things will continue to interest despite the arrival of the PBOC. The current macroeconomic environment will be very difficult (economically and politically) to tighten – have you noticed that the Turkish central bank has cut rates unexpectedly?

Precious metals should like increasingly negative real rates, and the accompanying financial repression. Commodities and real assets are bound to perform well in the long run, and stocks would benefit the most from the reflationary phase, the initial phase of inflation where everyone benefits and no one pays. Despite all the inflation in the real world, we have not yet entered its late and unpleasant phase.

Let’s go straight to the graphics (courtesy of www.stockcharts.com).

S&P 500 and Nasdaq outlook

S&P 500

Friday brought a daily break in the rally – however, the bulls did not give in to sellers throughout the day.

Credit markets

Credit markets

High yield corporate bonds lost less ground than investment grade debt, which may have fallen a little too sharply. However, the non-confirmation of the stock market progression is hardly visible.

Gold, silver and miners

Gold

Gold has managed to hold its own despite the surge in yields, but miners continue to be increasingly undervalued – if you are a long-term investor these are very good prices throughout the gold industry. PM. Silver continues to trade at odds with copper, and both metals (including a few others) are needed for the shift to the green economy.

Crude oil

Crude oil

Oil inventories took a break on Friday, as was the recovery in oil likely to be the next one as well. However, energies remain bullish and declines are to be bought.

The copper

The copper

Copper closed at weekly highs, but still hesitated against the CRB index. All is not well if you look at BHP (or FCX), which is a proxy for both copper and China.

Bitcoin and Ethereum

Bitcoin

Bitcoin and Ethereum have recovered from the crackdown on crypto trading in China and continue to successfully fend off bears.

Summary

Risk-on was not dethroned on Friday, but was not convinced either. Aside from some commodities, significant gains have been absent. Wait until you see the low volume day – one that is likely to continue until Monday. Risk assets still haven’t crossed the mark (no recovery from the 50-day moving average), and the VIX below 19 is slowly approaching the lower end of its recent range, meaning volatility may surprise us again shortly.

Thanks for reading today’s free analysis, which is available in full on my site. There you can subscribe to the free Monica’s Insider Club, which offers real-time trade calls and intraday updates for all five posts: Stock Trading Signals, Gold Trading Signals, Oil Trading Signals. , copper trading signals and Bitcoin trading signals.

Thank you,

Monique Kingsley

Stock trading signals

Gold trading signals

Oil trading signals

Copper trading signals

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www.monicakingsley.co

[email protected]


All trials, research and information represent analyzes and opinions of Monica Kingsley based on the available and most recent data. Despite careful research and best efforts, it may prove to be false and be subject to change with or without notice. Monica Kingsley does not warrant the accuracy or completeness of any data or information reported. Its content is for educational purposes and should not be taken as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments that are not suitable for all investors. Please note that you invest at your own risk. Monica Kingsley is not a registered securities advisor. By reading her writings, you agree that she is not held responsible for the decisions you make. Investing, trading and speculating in the financial markets can carry a high risk of loss. Monica Kingsley may be short or long in any security, including those mentioned in her writings, and may make additional purchases and / or sales of such securities without notice.

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