Precious Metals
With the Fed more sensitive to how its policy affects the global economy, and <i>vice versa</i>, we believe monetary policy will remain accommodative to encourage U.S. and EM growth.
It is dangerous to equate recent equity strength with economic vitality, as history shows that liquidity-fueled equity advances favor non-cyclicals over deep cyclicals. Take profits in gold, buy rails and sell industrial machinery.
Clearing the refined-product overhang in the global storage markets is not as straightforward as it used to be: The Kingdom of Saudi Arabia (KSA), China, and India all are making concerted efforts to boost refining capacity, which is leaving them with surplus product that ends up being sold in export markets.
A collection of 10 important charts to monitor closely through the summer months.
The 35-year bond bull market is coming to an end and the downward sloping trend channel for yields is changing to flat. Asset allocators should trim duration and fixed income exposure.
Refiners will reduce run rates over the next month or so to clear unintended inventory accumulation, but it's not like they've never had to deal with this situation.
Forecast is diverging from strategy for equities. Intermediate-term positives allow for a blowoff to the upside. But we do not expect the rally to have staying power over a 6-12 month horizon.
Commodity speculation provides liquidity to hedgers, allows price discovery, and offers access to an asset class that typically produces returns that are not correlated with stock or bond returns.
The blowout June nonfarm payrolls report reflects a tightening labor market, consistent with stronger ISM manufacturing and non-manufacturing readings. This will take time to impact Fed policy.