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Weekly Memorandum 9/7/2020

Markets are closed Monday in observance of Labor Day. The big story from last week is that we finally saw volatility spike and a pullback in equities. A new Mercator Letter was published yesterday, in which we published a series of support levels for the market. So long as these price levels hold, we would anticipate any declines to be contained and corrective in nature, versus an actual reversal in trend. But if frequent readers know anything about us by now, it's that we let price guide our actions instead of opinions.

Bitcoin, Ethereum, and Litecoin were all down last week too. T-Notes, precious metals, and Crude Oil posted losses as well, in a rather uncommon divergence from their traditional correlations.

We continue to observe global capital flows posturing itself for different presidential election outcomes. As we've shared in our Mercator Letters, our position is that a Trump reelection will likely lead to a rise in long-term interest rates, while a Biden election will lead to lower long-term rates for longer. The key now is whether the Fed will actually be able to regain control of inflation if and when data begins to exceed 3%. Traditionally, their mandates have been full-employment and price stability (inflation at or below 2%). This policy shift could have major repercussions for the economy, and not many people are talking about it.

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