Round No's to Round Up the Year

Macro Perspectives: Mon 21 Dec 2020

We're nearing the end of a chaotic year at (or near) some important round numbers in key markets. The S&P 500 is around 3,700, Oil near $50, the 10-year yield nearing 1% and the dollar index is at 90.

Translation: Stocks are on record highs and energy is relatively cheap, Interest rates are near record lows and the dollar is weak.

If you just had that information to go on, you would probably say the outlook looks very good for economic activity. As we start a new week, let's take a look at some key charts...

We discussed earlier in the week, small cap stocks historically perform best coming out of a downturn - that dynamic has really kicked in since the start of November.

We've also talked about the repricing of global assets, thanks to the explicit devaluation of money by global central banks, what’s noticeable in this chart of broad commodities, it's still in the very early stages.

With most commodities priced in dollars, the outlook for a continued bear market for the dollar (and maybe acceleration of the decline) is fuel for the young bull market in commodities.