Economic Scenario 3 is playing out before us, and by looking at CFTC positioning, consensus is really going to be caught off sides on this one based on our findings. Consensus is now long of small caps and short of U.S. treasuries – no no no says our model when staring a “Stagflationary” Environment square in the face. Stagflation = slowing growth, accelerating inflation. The model is now tracking Q4 2019 GDP at a paltry 0.36%.
Conditions are not what they seem to be….
My 2.5 yr old daughter has been on a Wizard of Oz binge lately, and I caught myself laughing out loud last night at the part where the Wizard is exposed for being a fraud, pulling levers and blowing smoke feeding the apparition that hovers over Dorothy, the Scarecrow, Tin Man, and Lion.
A lot of smoke and mirrors are present….
Pay no attention to the slowing economic data behind the curtain!! – Look over here at the greatest Soybean trade deal in the history of soybean trade deals!!
Soybean Deal with China
A slowing economic cycle
I’ve been called a cynic, a detractor, a doubter for expressing some of these views on here, but I’m sorry, I’m not sorry – We called the peak of the cycle in Q3 2018, and THAT’S A FACT (and auditable with previous trade signal/market insight emails to back it up) as we positioned clients long of U.S. treasury’s in Aug/Sept of last year just prior to the Q4 2018 swoon.
Inflation is accelerating while growth deteriorates and I’ll be damned if I’m going to be caught off sides chasing year-end FOMO/Performance long of U.S. small caps!
But I digress…
I’m actually thankful for this opportunity. We’ll once again get to smartly position ourselves for the next “big” macro move in markets! Remember, we’ll likely (according to our G/I Model) be in Scenario 3 thru Q1 2020, but we’re once again tracking to Scenario 4 (Growth Slowing/Inflation Slowing) in Q2 2020. Have a great day!
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