More Scenario 2 – Growth/Inflation Accelerating, stay the course.
US Dollar: can’t pick its head up for more than a day. We’ve entered a secular bear market, and we don’t expect any significant upside until the market pivots on the economic cycle. If you have not noticed, the devalued state of the USD continues to fuel inflation expectations, and burgeoning risk taking in risk assets (Stocks and Commodities). Bears beware here however, the USD short position has exploded to “overcrowded” levels – the most since 2006.
10yr Yields: We’ve now broken through the 1.00% fence line on the news last night/this morning. We think their could be more significant downside in bonds/upside in yields to come – hold a core position, and trade around it. selling at the top end of the range of bonds (low end in yields), trimming at the low end, rinse and repeat. A significant low in Bond yields (top in Bonds) has likely formed for many years to come.
Inflation Accelerating: do you really need an economist to come on TV and tell you that we’re experiencing inflation? Our commodity index continues to carve out new cycle highs.