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Weekly Memorandum 8/24/2020

The Nasdaq and S&P tagged new all-time highs today, while the Dow continues to lag behind. However, new highs look promising in the Dow too. This rally is a testament to the notion that a bull market climbs a wall of worry. The prevailing market sentiment remains in the camp of the bears, and this has provided a floor each time the market has declined.


Interest rates are slightly higher today, along with Crude Oil. Gold and silver are both down, but this isn't surprising given the recent positive correlation between precious metals and bond prices. That is, for the last few months, precious metals and interest rates have been inversely correlated. So much for precious metals only rising in an inflationary environment (opposite is true in this case).


Bitcoin is up as well, along with Ethereum and Litecoin. We continue to be very constructive on the crypto sector, not just in terms of the potential behind blockchain tech, but as a tradable asset class too.


Another sector worth monitoring these next few weeks is agricultural commodities. As mentioned last week, there's a chance a generational bottom in prices occurred in the last month. There have been a series of natural disasters and significant crop damage in many areas around the country. The reduction in supply could lead to rising prices.


But the U.S. Dollar is staging a rally here, although it's too soon to tell whether it's just a corrective rally or a reversal in the recent downtrend. We shared recently the macroeconomic outlook surrounding a falling dollar, so we could see a pause in some of those trends if this rally continues.

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