Bullet points to consider…
- The macro has been inflationary for a year.
- Everybody is on board that train.
- With the limiter of 2.7 to 2.8% not yet reached on the Continuum (30yr yield) the wider view is still inflationary, BUT…
- An interim cool down can come at any time. A pullback in inflation expectations and by extension, long-term yields would favor gold and the miners. You know I’d love to manage this sector rally with improving fundamentals, rather than just sentiment, eh?
- Other sectors that could remain relatively intact are Healthcare, Staples, Utilities, etc. The more defensive stuff.
- Treasury bonds are bouncing again (yields pulling back) and that could come with a squall of risk ‘off’ behavior as we are seeing in Semi and Tech, which are dumping out. But I’d actually prefer them along with the sectors noted above if yields persist in retreating.
- It’s an unsettled macro right now and I am just putting words to paper here. Trying to figure it out myself.
- But the key seems to be Treasury bonds. If long-term bonds continue to bounce a market that has been rotating sectors/markets since last summer could be doing so again.
- Finally and worth a lot of consideration… we have been noting ‘late stage’ bull market or bull rally for some time now. That was the traditional signaling of the rotation toward value and away from growth. So, let’s not discount an important market top. The window is after all May-July (IMO).