Weekly Memorandum 9/14/2020
Equity futures are slightly higher this morning after booking two consecutive weeks of losses. We've outlined numerous times how the market is posturing itself for the presidential election results, and if the September 2 high was meaningful, we could see a continued pullback for the next couple weeks. However, we still lean with the idea that this pullback will be more corrective in nature versus an actual reversal in trend.
One market that especially has our attention at the moment is the U.S. Dollar. After a multi-week decline, we could see a meaningful reversal here. Worth noting is that the dollar peaked virtually as soon as the lock downs in the United States took affect. This means that global capital pulled out of the U.S. as soon as we were "closed for business." But now it looks like the economy may reopen, so it will be interesting to see whether global capital will want access to the "robust" American consumer once again.
Crude Oil was down slightly last week, while precious metals were up slightly, along with the major 3 cryptos (Bitcoin, Litecoin, Ethereum). We've also noticed agricultural commodities like corn, soybeans, and wheat rip higher recently, which could serve to ignite the inflationary pressures central banks are supposedly so desperate to achieve.
In summary, we could see deflationary pressures increase the next couple weeks as the dollar and T-Note prices appear poised to rise. This could turn into a "buy the rumor, sell the news" type of event whereby markets form important highs or lows a couple weeks before the election. Chances are, the market will have it figured out way before any pollsters do.