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Weekly Memorandum 12/6/2021

Despite a decent late-day rally on Friday, stocks finished last week on a defensive note. There has been a growing consensus surrounding the inflation narrative, but evidence is mounting that we could be instead entering a period of transitory deflation. Stocks are finding rudimentary bids this morning, but will need much improvement before we can confirm a low of significance is complete. It's worth noting the S&P hasn't experienced a 10% drawdown since September 2020.

Interest rates fell, which means bonds markets rose last week. This isn't the sort of market development that is congruent with higher inflation. Crude Oil continued its decline, while precious metals appear to have found a floor in the short-term. Cryptocurrencies remain on the defensive, as sentiment remains very optimistic in that sector. The U.S. Dollar continues to consolidate its gains near multi-year highs, which is bullish too. The shift with respect to dollar-denominated assets has been from stocks to bonds. This is a sign that market conditions continue to favor "risk-off" versus "risk-on."

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