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Weekly Memorandum 7/6/2020

In good old patriotic fashion, equities are up very nicely to start the week after the Independence Day holiday. The Nasdaq is trading at all-time highs, but the S&P and Dow are lagging behind. This isn't an issue yet, but we definitely need to see the other indices catch up sooner than later.

The Dollar is taking a hit this morning, however, and it's more so against the Euro instead of the Yen. When a domestic currency falls while its stock market rises, its a sign of inflationary asset appreciation, or nominal gains. We typically like to see a country's stock market rise in conjunction with its domestic currency, because this means that real gains aren't lost due to currency fluctuations. We are still bullish on the Dollar overall, but this is a development we will monitor closely in the next few weeks.

If the Dollar is going to continue its weakness, we would expect Crude Oil to continue its rally. We are seeing interest rates move higher this morning, so this could be construed as increasing inflationary economic pressures in the short-term.

Gold and silver are both up nicely, and so is Bitcoin. June capped off a great month for most markets, and even more importantly, the best quarter of equity returns since 1987. Everything that's happened in the market so far this year is a testament to the idea that sentiment follows price, not the other way around.

Our biggest concern remains the increasing divergence of wealth between asset owners and non-asset owners. Many Americans lost their jobs as a result of the coronavirus lockdowns, and have not participated in this equity rally. Cash flow is not the same as net worth. Both are important for the long-term financial picture of any individual or household.

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