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Weekly Memorandum 10/25/2021

With the exception of the Nasdaq, stocks closed at their highest weekly level in history this past week. This is noteworthy because the Nasdaq often leads the market higher. This likely speaks to the ongoing battle between value and growth sectors. Growth has outperformed for years, but the macroeconomic environment continues to evolve in a direction that increasingly favors value.

T-Notes closed at a new multi-month low last week, and have erased virtually all of their gains stemming from the covid-crash. As interest rates continue to rise, it's an indication that inflationary pressures and demand for money are rising. Eventually, it will translate to higher risk premiums, especially once the Fed actually begins to taper. This was something we explored thoroughly in the recent Mercator Letter that was published this past weekend. There may be a disconnect between the market's expectations and the reality of what the Fed actually plans to do.

Crude Oil continued to steamroll higher, and closed at its highest weekly level since October 2014. This rally is doing no favor for rising inflation expectations. Meanwhile, the dollar continues to consolidate its gains, as it attempts to build up enough energy for the next move higher. The world reserve currency continues to benefit from the carry-trade, whereby global capital simply purchases the higher-yielding currency.

Ethereum closed at its highest weekly level in history this past week, which is nothing short of bullish. A new Mercator Crypto report will be published this upcoming weekend. Our analysis in this sector has proved to be very fruitful thus far. The Bitcoin rally paused, but continues to behave in a bullish manner. We also saw decent bids come in for gold and silver, yet they remain below key resistance levels. If those clear, then it could be off to the races for that market.

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