DXY rebounded then faded last week. Same for EUR:
The Australian dollar lost its luster:
I warned you gold is volatile. I would equate this correction with 2003 as the world emerged from the tech wreck and gold popped then dropped as it entered the next phase of the great Greenspan bubble:
Oil has no chance:
Copper is worrying:
Big miners got whacked:
EM stocks did better:
Junk got flogged:
As US yields popped:
Stocks are more or less unchanged at the highs:
The only chart that matters faded materially last week:
Despite a week of fireworks, nothing has changed. Russia forced its citizens to take a vaccine that may kill them all in six weeks. We’re still a long way from a widely available vaccine so long as leaders are rational about it. A dangerous assumption these days, most certainly, but if the pandemic has taught us anything, it is that handing ammunition to anti-vaxxer loons is a VERY bad idea.
This is more fakeflation in my book. There is no reason here to back up yields and trigger stock plus forex rotation:
- China is lukewarm at best and investing heavily in more deflation.
- Europe is decent but wrestling with a resurgent virus and it is always deflationary.
- The US remains the consumer of last resort and it is completely stuffed by the virus, with an unresolved fiscal cliff approaching in two weeks::
What we are likely seeing at the moment (provided the fakeflation holds) is a correction in overheated markets. And it may take a while. The ship is leaning heavily towards the fakeflation winners of a weak DXY:
And strong EUR:
So the market has some wood to chop before it can push through these overheated positions.
The Australian dollar will mark time as well, if so.
