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Weekly Memorandum 1/4/2021

Stocks are poised to start off the year on a positive note, as we come around the corner from what's known as the "Santa Claus rally." This includes the last 5 trading days of the year, plus the first 2 of the new year. This periods ends tomorrow, January 5, and when this period produces positive returns, it typically portends a positive omen for the year ahead with respect to returns.

Once again though, the big news over the weekend was cryptocurrency. Bitcoin surged to a new all-time high, topping 34,000, while Ethereum and Litecoin ripped to new multi-year highs. With euphoria and manic sentiment beginning to grip this sector, we encourage readers to pick up a copy of the latest Mercator Crypto Report that was released late last week. There is even a free copy of the November edition available for readers.

In other markets, we saw various agricultural commodities including corn, soybeans, and wheat close out at their highest monthly, weekly, and daily levels in years on Thursday. This is a very strong signal that we are in the early-stages of a new, secular bull market in agricultural commodities. This ties into our stagflation thesis. That is, we expect inflation to come back into the economic foray, however, we don't expect an actual recovery in economic activity quite yet.

The U.S. Dollar continues its decline, which provides a major boon for our stagflation thesis. As it turns out, global capital isn't a fan of QE-Infinity monetary policy, along with a fiscal policy filled with pork, limited assistance to Americans, and record-large deficits.

Lastly, Congress is set to ratify the electoral college vote this week. We expect various forms of shenanigans to ensue, which could bring volatility to the T-Note market. After all, this is the asset that represents the federal government. As we've posed before, why would global capital continue lending to an entity that is beyond dysfunctional? Be prepared for higher rates in the short-term.

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