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Mega themes heading into 2022
As we head into 2022, I want to step back and take a big picture look at the market.
“The one intermarket chart that I watch.” The chart below ties together a lot of the trends that we’ll look at in this blog post.
Rates & Bonds
Mortgage Rates are in a 40-year downtrend (the same can be said for bond, dividend, and rental yields). This is certainly not a trend I want to fight.
AGG Monthly. Aggregate US Bonds are in a bullish consolidation within a long-term uptrend. This is very interesting given all the inflation talk we’ve been hearing this year.
US vs. global stocks
The monly chart below is effectively the SPY:VEA ratio. In late 2015, US stocks made a 45-year (!) breakout relative to foreign developed stocks.
US growth vs. value stocks
Last year, MSCI USA Growth:Value also made a 45-year breakout!
On a shorter weekly timeframe, we see that in Oct, growth made a 1yr breakout relative to value. Keep an eye on this chart to see if we get a breakout retest and subsequent bounce.
US large-caps vs. small-caps
If growth is stronger than value, let’s take a look at large-cap growth vs. small-cap.
QQQ:QQEW, Monthly. The trend has been up for a decade, and it’s accelerating even on a log-scale.
ARKK:QQQ, Weekly. Smaller growth stocks were all the rage at the start of this year. That frenzy has worn off in the past 10 months, as the market has been shifting away from the high beta/high multiple/no EPS stocks and towards the more established large-cap FANGAM names.
Gold, Quarterly. Like bonds, gold is coiled tightly. It is sitting on 10yr support within a long-term uptrend. I really like this chart.
Palladium, Monthly. After hitting support on Wed, palladium rallied 8% on Thurs - its 3rd largest daily gain in at least 10 years (first two were off the March 2020 bottom). What’s really interesting is that the smart money currently has their highest long position in palladium, ever!
Farmland. I first discussed the bullish setup in LAND on Oct 4th.
LAND is up 115% YTD, vs. 25% for SPY. Last month, LAND made a 7-year breakout relative to SPY. Despite the very strong gains this year, I believe the bullish trend in farmland is still young.
I continue to like US large-cap growth and farmland. Bonds and precious metals also appear they could get going in 2022.
This all points to a consistent message of disinflation and risk-off, rather than inflation and risk-on.
That’s all for today. Happy holidays, everyone!
Important Disclaimer: This blog is for educational purposes only. I am not a financial advisor and nothing I post is investment advice. The securities I discuss are considered highly risky so do your own due diligence.