Goldilocks still…

Goldilocks backdrop persists

We expected a summer cool down in the inflation trades. We expected that to be reflected in a temporary Goldilocks environment (not too hot, not too cold where inflation expectations are concerned).

As part of this rotation Tech and Growth would retake leadership, at least temporarily. Sure enough, the yield Continuum pulled back, value/growth broke down and Tech has re-taken the lead. Curiously though, Commodities and the Copper/Gold ratio have remained firm enough, not convinced that the inflation/reflation is over.

This chart holds both messages, Goldilocks in play as inflation expectations break trend, but counter-cyclical gold, having less inflation benefits than cyclical markets and assets, continues to under-perform.

What’s the potential fly in the blessedly pleasant ointment? Well, you see it there in a 4th panel. Thus far it is restrained, but could be bottom-making. Just a wink, nod and an FYI for your viewing pleasure.

If you are a casual market watcher and don’t know what I’m talking about well, that’s nothing new. This is mad science, but it works. It’s not taught in Economics 101. I barely got through those classes.

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