The recent sell-off in long-duration U.S. bonds has taken the wind out of yen’s sails, with yen crosses pushing to new rally highs and USDJPY rising to three-week highs. However, the yen’s decline is increasingly at odds with its fundamental drivers and we expect double-digit gains in the currency over the coming 12-24 months. The…
U.S. energy stocks continue to trade at incredibly low levels relative to the ongoing rally in the S&P 500 and crude oil prices. Based on the historical correlation between the XLE/SPX ratio and oil prices, the ongoing crude oil recovery suggests the XLE/SPX ratio should be trading more than double current levels. The energy sector’s…
The ongoing decline in U.S. real interest rates suggests that EM currencies should continue to outperform in total return terms, and we remain bullish on the WisdomTree Emerging Currency ETF. After turning bullish on April 2 the index has risen 7% and we believe the rally may be just getting started given the strong gains seen in…
Despite seeing 34% total return gains since we turned bullish on the iShares MSCI United Kingdom at the height of the March crash, the index still offers significant upside. Despite aggressive earnings and dividend cuts, in large part due to the high weightings of the energy and financials sectors, the EWU still trades at a…
We continue to see the ProShares Inflation Expectations ETF (RINF) offering strong upside potential with little downside risk as inflation pressures continue to build. We also believe the ETF offers a viable alternative to gold for those looking for an inflation hedge given the latter’s strong outperformance so far this year. Despite the strong rally in…
Over the past 10 years, S&P 500 per share dividends at the fastest pace on record, expanding them at an average rate in excess of 10%, far in excess of GDP. Total U.S. corporate dividend payments have hit a new record high of 7% of GDP, double the long-term average, thanks to a number of…
The dollar’s ongoing weakness looks highly likely to drive a reversal in the outperformance of U.S. stocks relative to the rest of the world that has taken place since 2008. The continued outperformance of U.S. equities in the face of the dollar’s decline reflects two factors: the incredible outperformance in corporate fundamentals in local currency…
Gold’s rally has been driven by the U.S.’s increasingly loose monetary and fiscal policy mix, but the metal has become extremely overvalued relative to the broader commodity complex. Gold bulls are effectively betting that the surge in money supply will cause consumer and commodity prices to catch up with elevated gold prices while real yields continue…
Returns on a balanced portfolio of U.S. stocks and government bonds are likely to be negative over the next 10 years, underperforming those seen during the Great Depression. The housing bubble of 2007 and the 2000 tech bubble pale in comparison to the current policy-driven everything bubble. Based on the SP500’s payout-adjusted dividend yield, the…
With all currencies losing value relative to gold and silver, we believe the Japanese yen remains the least bad fiat currency option. While real interest rates continue to head lower in the U.S., they have remained in positive territory in Japan thanks to persistent expectations of price deflation. The current spread of Japanese over U.S.…