Mark Dow has been a guest on this podcast more times than anyone else for a good reason. Selfishly I always enjoy chatting with him. His perspective is fascinating to me because he does such brilliant job of combining price behavior with sentiment analysis and the global macro intermarket backdrop.
Mark worked for the U.S. Treasury Department in charge of Emerging Markets in the early 90s before ultimately running money for a Global Macro Hedge Fund in New York City. So he has a lot of opinions on economics and politics, but he's great at not letting those things get in the way of his price behavior and sentiment analysis. He's figured out how to separate them but also use his expertise to his advantage. That's not any task.
In this post, we want to share some research that was provided to our US Subscribers, which attempts to explain why the difference in Interest Rates in Europe and the US is causing trouble in the markets.
Everything between the horizontal lines was written for US subscribers, so keep that in mind as you're reading it. The conclusion/takeaway for India is way at the bottom in bold.
In June we outlined that the "Reflation Trade" indicators we track had picked up significantly after reaching levels of long-term support in March.
Since then that thesis has played out and we've been taking advantage of it in Metals, cyclical stock market sectors like Materials and Industrials, and even Agricultural Commodities which managed to break out.
But...after a nice run many of these assets and intermarket relationships have pulled back over the last month or so...begging the question "is the reflation thesis over?"
Luckily for us, we only need one chart to discuss what's happening and how we're approaching it.
It's always fun chatting with Catherine over at BNN Bloomberg. She has the uncanny ability of getting me on her show just at the right time! In February, I explained very clearly why we were raising cash (the week before the biggest market crash ever), and then in early July I was screaming on television to buy stocks aggressively, just before a slew of new sectors started breaking out to the upside.
Today, I have a similar bullish view. This is a market that is rewarding us for buying stocks. That's the bottom line. And we don't see any evidence of that changing yet. Catherine also asked me about the Bond Market and I explained why I think rates go higher.
We like the have fun with these. Life is short. I hope you enjoy it!