Its been a very significant week for risk markets. We have seen the complete reversal of the cyclical weakness themes vs defensive strength. Transports and Financials and other cyclical themes have moved from the negative beta to the positive beta. The evidence is compelling across asset classes. It is all due to fast rising inflationary expectations. Commodities have continued their surge in value and copper has recently joined the breakout from her 5 yr cyclical bear market. And importantly, i want to reiterate here that although rates may rise real rates will likely increase their negative basis therefore underpinning a significant expansion of global money supply. The political win of Trump in the US only increases this likely outcome though both candidates had embraced inflationary policies.
Here the Swiss team’s latest:
Little to add. Its an exceptionally bullish set up now across cyclical themed asset markets. The commodities inverse correlation to the USD has been rendered irrelevant now due to the more important multi century positive correlation between commodities and inflation.
And here Fitzpatrick, citi’s technical guru. Credit due to Fitzpatrick again as he has forecast this reflationary risk on move more accurately than almost any other technical commentator.
And here Meisels tech report restating the bullish setup:
And here SC commentary on the FX markets:
The long US$ powers on ward, for now.
And here SC on the cftc positions:
Note the pm cftc indicates the metals could run nicely as the position shake out has been deep.
All the best guys and as the US debt approaches 20trn US$ the winning Republican party ought to remember
“Democracy is a process by which the people are free to choose the men who will get the blame”.
Laurence J Peter (1919 – 1988)
Rich