While we will probably get a short term pullback in interest rates we remain bearish on bonds. Basically every indicator and model that we follow show bonds as a sell. It is probably safe to say that the inflation numbers are a joke and while 2.7% may sound good it is wrong. Just like calling a fat man skinny doesn’t make it true, the same goes for “low” inflation. Guess what it is at least 1% higher and probably closer to double the reported numbers. There will be more posts in the future on this.
The signals for Government and Corporates have been on sells for weeks now but the high yield only came in as a sell three weeks ago.
As for stocks as much as it pains us to say it we see the SP500 staying in bull mode for the immediate future. Virtually all of our models remain in a buy mode. So although we wouldn’t be initiating or adding to our positions right now we remain on a Hold.
Favored Area-Large Cap Value
Top Two Sectors-Energy and Materials (XLE and XLB)
As for precious metals we are bullish on them right now. Not wildly so but we have had a few buys on for several weeks now. So for metals we are 40% invested with the rest in cash right now.
Gold-Long 40% of metals allocation.
As for the economy as a whole we remain short term neutral and long term bearish. In the next few months we should be alright but by mid fall we wouldn’t be surprised if we see the fabled recession. That is a ways off but we would not be surprised if it came about.
In the currency world we are short term short the Euro, Pound, Swiss Franc, and the Swedish Krona. In the coming weeks or months we will revert back to the short dollar position that long term has done so well. In addition to that we are long term bullish the Australian Dollar. If we actually go into hyper inflation mode the AUD will benefit significantly and if inflation stays where its at the AUD will still be OK. Overall a good risk reward trade.
That is it for now. Come back often because we are ramping up the posting.
Happy Trading and as always Manage Your Risk,
The Macro Trader
Disclaimer-None of this is investment advice. It is the opinion of the authors. If you choose to trade off of this you do so at your own risk and none of the gains (unfortunately) or losses (fortunately) are the fault of TradeMacro.com. Be safe, do your own due diligence on anything you see, and keep a level head.