So then NOT Transitory?

JC Parets
October 20, 2023

Did you think inflation was just going to come and go?

Just like that? And now we all move on?

I highly doubt that it's that simple.

According to the bond market, inflationary pressures are likely just getting started.

This is a $120 Trillion asset class that's so big there's just no where to hide.

For instance, take a look at the Inflation-protected Treasury Securities, that we refer to as TIPs. And when you compare them to nominal yielding Treasury Bonds, you'll notice the new 52-week highs this week in the ratio between the two.

This is what the bond market is pricing in for inflation. Not the angry economist on the internet. Not the pretty lady on basic cable.

This is the bond market. This is whose opinion actually matters:

Let's zoom out and take a look at this ratio with the price of Crude Oil overlaid.

Notice how the bond market's inflation expectations move tick for tick with Crude Oil Futures:

So what does this environment mean for investors?

For me, the multi-year secular uptrend in Commodities relative to Stocks continues.

This all started when Crude Oil actually traded below zero back in 2020. Could you think of a more epic end to a secular bear market for commodities?

That extreme sparked the beginning of what we've seen the past few years.

And one thing we know about Commodities bull markets is that they don't just last a few years. Historically they last over a decade.

So it looks like this party is just getting started.

Something else you might notice when studying these bullish commodities cycles is that all of them include Gold participating to the upside.

But we haven't quite seen that yet this cycle.

We discussed Gold and what we're doing about it on this week's LIVE Call.

I went over my 2 favorite Gold stocks to prepare for the rotation into precious metals.

Check out the video in full here and download all the slides.

Let me know what you think!

JC

 

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