Rule #4 on my rules of personal investing is to constantly keep learning. I was fortunate to be forced to do this as I worked in many different asset classes in many different countries

A skill that has helped me try to consolidate the thinking is the intermarket analysis learned in the CMT examination process. We can learn from the drivers of the flows of money in the various corners of the market. We may spot early trends or outliers

For instance, consider the chart today. I have on here the US 30 year yields (inverted) in orange. I compare to the NDX outperformance of SPX in white, Bitcoin in blue and the ratio of copper to gold in purple.

Many if not most of you may be thinking that I have lost the plot and these assets or ratios have little to do with each other. However, a view of them over the last 18 months suggests perhaps there is a common thread. Spurious correlation? Maybe, maybe not.

You see, the concern over the last 18 months has been inflation, and the central bank response to inflation. As central bankers realized inflation was not transitory, they were forced to raise rates aggressively. This happened globally even though the Fed gets the media buzz.

Going into this period, we had a bubble in duration. Free money in the form of 0 interest rates combined with fiscal & monetary stimulus post Covid led to a sharp rise in long duration assets in every asset class.

This unwound as rates rose. We clearly see this in the 30 year which is where most focus on duration. However, NDX stocks are longer duration than SPX & we saw it here. Crypto, especially Bitcoin, is very long duration as there are few cash flows.

Copper to Gold ratio is the commodity mkts measure of global growth. It also fell as rates rose with commodity traders anticipating a global growth slowdown. That helps describe late 2021 and all of 2022 but what about now?

We see NDX meaningfully beating SPX. We have even seen Bitcoin move off the lows. Have we seen duration in bonds keep up? Not really. Bond seem to suggest inflation may drop near term but could be a problem longer term still

Maybe this is driven by global growth expectation then. Is copper outperforming gold? Not at all. In fact quite the opposite. Commodity mkts seem more concerned about a recession than stocks

What does this mean? Is the NDX more clued up than these other mkts? Or are equity investors forcing the idea a little too much? I will let you decide, but I think you know my answer.

There is much we can learn from other investors, even those in other asset classes. It is important to keep learning.

Stay Vigilant

#markets #investing #stocks #bonds #cryptocurrency #commodities