While Nasdaq valuations remain below the dot com bubble peak, return prospects are almost as bad as they were back then due to the much slower potential for earnings growth. The parabolic rise in that tech stocks will come at the expense of future returns as valuations mean revert lower in line with historical trends.…
There is a growing risk that U.S. yields spike in response to the surge in risk assets and inflation expectations as we saw back in the 2013 taper tantrum. Our measure of fair value for U.S. yields suggests the 10-year should be trading around 1.2%, implying negative total returns over the next 12 months. We…
Silver has gained 25% since we put out our bullish case back in March, and remains undervalued relative to its historical drivers. Our short-term fair value model for silver suggests the metal should be trading over 20% above current levels. Longer term, the easy policy mix which has benefited gold through deeply negative real yields…
U.S. 10-year yields have broken below uptrend support and the measured move from the pennant formation suggests a potential move down to zero percent. However, the fundamental picture points to higher yields with our fair value model for 10-year yields pointing to 50bps upside over the coming 12 months. This reflects a rise in the…
Silver prices have traded more closely in line with the strength in gold than the weakness in stocks over recent weeks, which could be the start of an important trend. We expect inflation expectations to continue their rise in spite of U.S. equity declines which should allow silver to continue its rally. We continue to…
Expectations of continued monetary and fiscal stimulus continue to suppress U.S. real interest rate expectations providing fundamental support to gold prices from a short-term perspective. From a long-term perspective, gold is elevated relative to consumer prices and the broad commodity complex. We expect gold prices to remain supported while consumer prices and the commodity complex…
Even as dividends on the MSCI U.K. have seen drastic cuts, the index’s dividend yield remains more than double the MSCI World at a healthy 4.5%. The EWU ETF looks set to benefit from cheap valuations, the recovery in resource prices, and the potential for pound sterling appreciation. In terms of relative value, Amazon, Netflix,…
The yen remains out of line with its fundamental drivers, thanks in part to a surge in yen crosses which are at risk of reversing should the risk recovery unwind. In the event of continued dollar weakness, we would expect the yen to join in with the other majors, or at least not depreciate. After…
The U.S. economy is transitioning from deflation to stagflation which should see the SP500 fall while commodities and precious metals rally as has typically been the case. Equity bear markets tend to be associated with rising inflation which we believe reflects the lagged impact of prior reckless monetary and fiscal policies. The more the Fed…
Inflation break-evens continue to price in a low long-term inflation outlook the likes of which we have not seen since the Great Depression despite surging money supply growth. We would not be surprised to see inflation head into the high-single digits towards the second half of the decade as investors balk at the prospect of…