Investors aren’t limited to only investing in the S&P 500 and the Dow Jones Industrial Average. Every week we share the market trends we are following. We are interested in whether the trends in those markets are continuing or if they are experiencing a temporary or complete reversal.
When we identify trends, we are only concerned about the price data and what it says about any given market. We don’t need to know why a trend has formed to invest, but our human nature wants to understand what is driving them. Each week we try to offer some perspective on what we think the most substantial moves are and what critical drivers are behind them. Here we look at what is going in our globally diversified, non-correlated Crystal Bay Ubitrend strategy.
Last week’s continuing trends:
- Soybeans
- Chinese Equities
- Palm Oil
- Russell 2000 Index
- Chinese Yuan
Last week’s reversing trends:
- Rice
- Japanese Yen
- Japanese Government Bonds
- German Government Bonds
- Natural Gas
What we are taking note of:
At times when governments seem to be in disarray, it helps to remind ourselves about what unites the major parties and all the important players. No matter who comes out on top, they will hold the following beliefs:
- Fiscal deficits do not matter. There is no size at which a fiscal deficit is too large.
- Printing money comes without any downsides and, as a tool of policy, it has been underused in the past.
- Inflation is not a problem; rather, too little inflation is a problem. Overshooting inflation targets is a good thing and must be encouraged.
- Interest rates should stay low no matter where we are in the economic cycle.
- A weak dollar is better than a strong dollar. Countries whose currencies decline against the dollar are currency manipulators and must be punished.
The government is not hiding these policies from us. There is no conspiracy. These are explicit goals adopted in full view of the public. They are not a political program and thus not subject to the political process; they are the new Washington consensus of all the players that matter in both the legislative and executive branches as well as the permanent government bureaucracy.
As investors, we should be grateful for the clarity and commitment of our government to this program because it makes our job easier. We do not have to speculate how the government will act in this or that scenario. We know exactly what it will do for the foreseeable future. All we need to do is to take them at their word and prepare.