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Weekly Memorandum 10/26/2020

Equities are lower to start the week, and actually experienced a gap down as we enter the final week before the presidential election. If we close significantly lower today, it could be a short-term sell signal until the election results are known. Nonetheless, we still like the idea of the late-September low being the pre-election low until proven otherwise. Stocks finished lower last week, but not before recovering most of their losses by Friday. Normally, this would be a positive sign in terms of price action.


Interest rates also crept higher last week, which means that bond prices were lower. They're now pressing up against an important level of support, which if broken, would likely lead to an inflationary spike, although equities would likely stand to benefit in the short-term too. With the exception of Crude Oil, commodity prices were higher last week, and in the case of grains, saw their highest weekly close in years. This too, lends credence to some sort of re-inflationary narrative.


The 'Big 3' cryptocurrencies were higher last week too, while precious metals were split. These asset classes seem to be trading inverse to the dollar at the moment. That is, as the dollar has declined in recent weeks, crypto and metals have performed well.


A new Mercator Letter was published yesterday, where we outlined our election analysis based off current market trends. We also shared how capital flows have been outwards away from the United States, basically since March of this year, and what the repercussions have been for the market and economy overall.

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