Looks like the rotation that everyone said would be a thing has become a thing. Inches upon inches of newspaper thickness has been dedicated to this transition from growth to value. I continue to reiterate this as being a good move for portfolios to provide balance on portfolios.
The debate rages as to whether inflation is going to be a thing or if it's not. I think it will be a thing, at least for a while. Fact is it's causing the 10 year US treasury yield to go up and plenty of people are discovering that the 10 year pretty much determines the price of everything else.
Have a look at the cover shot on this article. This is 3000 companies surveyed and 60% are raising prices. Materials, Consumer Staples, Utilities and Energy were the biggest majorities and those are some pretty interesting fields if you're thinking inflation isn't a thing.
Also they're fields that depend on the prices of various commodities, which are going up on supply issues and demand issues. I remind people that not only is the world reopening but the "EV Revolution" will place a huge demand on metals. Someone I follow on Twitter, Frances Coppola, who writes some good things says it best: "The pivot away from carbon is a pivot to metals....Green energy is not unlimited and has serious environmental costs."
Here's the link to a very well put together piece that raises the question at what cost this rush to run away from carbon is having. Nickel, lithium and cobalt mining (for batteries) have their problems. EV cars need 3x as much copper as an internal combustion engine- powered vehicle.
Don't start me on solar.
We need to make the move to clean energy but I fear we are moving too fast as a crowd to dig the things out of the ground to do it.
That being said, my job isn't to preach about the environment it's to preserve capital and where possible grow it. For that reason I am happily long commodities.
Speaking of long commodities recently I put together an all-star basket of ETFs that I've named the "Jimmy James' 10 Year Yield and Inflation Rise Busters" with an acronym turning out to be a happy JJTYYAIRB.
Just rolls of the tongue. You want a flashy acronym for a bunch of stocks go talk to Jim Cramer. I'm busy.
Instead of that, let's put it in the frame of my hugely successful "Horsemen of the Apocalypse" I created last year after the market was destroyed and we'll call it the Horsemen of the Recoverocalypse"
As mentioned I'm not one for flashy so it's literally just a cut and paste off an Excel posted above.
Commodities, Value, US Small Caps, Inflation and Food. There's your basket. If you think the above is true then that's the way forward.
But let us talk of the kids and their stimulus cheques.
20% of the stim will go to equities and that rises to half of stim received by "the youngs" will go to the stonks.
If that's not bullish I don't know what is.
But it's all about where you invest at the moment. Buying the market could return a flat result and no one wants that.
All eyes on the moves by Biden on their USD 2 trillion infrastructure plan (which will have a big push on clean energy) and again don't lose focus on the 10 year. Good mate David Scutt posted something from BCA Research showing the S&P 500 doesn't really flinch on yield rises.
However put that next to this one below showing the NASDAQ relative to the Russell 2000 (small caps) and it can be seen that maybe NASDAQ is a bit hot, Russell is a bit underdone and the 10 year has some room to move. Be picky on where you're investing it's not easy like it was last year.
Remember this is just the barest normalisation of rates. Relax. The market will find it's balance.
For now there's a handy short on Emerging Markets which I spoke bluntly about on Ausbiz to save me having to write it down again.
Remember, we're all set for the biggest reopening trade since WW2.
"All the best and welcome to the 20's where there's always a bubble,"
James Whelan
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