A look at inflationary dynamics through the lens of TSX-V/TSX

The ratio of two Canadian markets indicates cooling inflation

One of the tools we use in NFTRH is the ratio of Canada’s speculative cow pastures (i.e. risky, often resources-oriented stocks) vs. Canada’s real stock market, the TSX.

The TSX-V/TSX ratio has been pulling back since topping last February. I do not cheer lead for one outcome or the other. My only job is to be right when the various indicator decision points render their decisions.

The yield curve is confirming the message by flattening. With stock markets still bulling, the message currently, as has been the case for a while now, is that markets are in a brief Goldilocks phase, at least.

The Teflon Don, AKA the Good Ship Lollipop, AKA the US stock market loves Goldilocks. Gold and commodities would not, if it extends. Gold, having already been in correction for 1.5 years, would suffer deflation the least and also lead the next inflationary recovery, as commodities get hammered and stocks go bearish. And on and on the macro whirs.

yield curve

I am having a good week and hopefully a nice close to a good year overall. Not great by any means, but good considering the macro grind and frequent rotations within the markets after a year (2020) that could not help but produce solid profits.

While keeping in close touch with the market here and now, working seasonal and other trades aligned with today’s macro, I am most interested in the 2022 macro and the changes to come. It’s actually pretty exciting because it could mess up a max number of players if they are not reading the macro beneath the headlines correctly.

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