The rush into commodities showed no signs of abating this week. It makes little difference whether it’s a play to try and get ahead of the inflation curve that is garnering practically all the MSM headlines now or a place to park money to escape the volatile equity market and suddenly miserable bond markets.
Whatever the rationale, all we know for sure is that oil is $85, cotton, corn, soybeans, soyoil, wheat, platinum, and even silver at are near multi-year highs.
Also, this week we saw the People’s Bank cut it’s one-year loan prime rate by 10 bps and its prime five-year rate by 5 bps. They also signaled lower rates were likely coming in the future and discouraged the Fed from aggressively tightening their monetary stance.
That may help explain why the Xinhua China 25 ETF (symbol: FXI) is up 6.7% YTD while the SP-500 is down XX YTD.
Another interesting area of strength came from the metals, particularly silver, which saw a XX rise this week and now sits at a XX high. It has outperformed both gold and the miners significantly lately as rumors of short-covering and hard to find physical supply to deliver were rumored since Tuesday.
Also interesting was the collapse of the correlation between higher rates and lower prices in high-priced tech stocks. The 10-year yield fell from a high of 1.87% to the current rate yield of 1.75%. Despite the decline, the Nasdaq 100 fell XX% this week and is now in official correction mode (10%+ drop from highs)
Despite the VIX hitting its highest level since Christmas, bonds have shown little interest in serving as a safe haven that many think they do and are likely banking on in their 401ks.
So how best can we summarize the various snippets above? In a word …alternative. We have been saying for months that 2022 will be the year to seek alternative styles of investments. And after just 3 weeks that thesis has thus far played out. It was reported by Reuters this week that hedge funds surpassed the $4 trillion mark in assets under management in January.
Many have, rightfully so, criticized hedge funds in recent years for their inability to keep pace with the Fed-fueled markets. But the fact that despite the criticism their assets under management ticked over $4 trillion, an all-time high, has to make you wonder if somebody knows something out there and is positioning themselves accordingly.
-Google has partnered with Coinbase and Bitpay to store crypto assets in digital cards
-Man Group is reportedly looking to create a crypto fund for its clients. They manage over $40 billion in assets.
-We continue to hear of a rabid demand for blockchain/cryptocurrency based start-ups and unicorns across the spectrum, although the underlying price action sure is not reflecting it – not even close.
-The Fed on Thursday opened a debate over a possible digital currency