Below are some of the most interesting articles, quotes and charts I came across this week. Click here to subscribe to our free weekly newsletter and get this post delivered to your inbox each Saturday morning.
Stock and bond prices have become disconnected to a meaningful degree in recent months.
'Stocks are very overbought relative to bonds.' https://t.co/5LvmUrnfya via @SoberLook @Lvieweconomics pic.twitter.com/FZQpnCGQZr
— Jesse Felder (@jessefelder) July 21, 2023
But if a second wave of inflation is on the way, interest rates may not be able to fall in the way stocks have now come to discount.
'Investors should brace for a second wave of inflation, as was the case in the 50s and the 70s.' https://t.co/0t3652BwKU by @VincentDeluard pic.twitter.com/X1HOAuhoYm
— Jesse Felder (@jessefelder) July 19, 2023
Even more important, persistent inflation and elevated interest rates could begin to pose problems for the public financial position.
'Within 10 years, US government interest payments will exceed spending on defence and on social programmes. The BIS says developed economies need to bring deficits down sharply in this high-rate environment or end up with more new debt than new growth.' https://t.co/KKxNz7qJGg
— Jesse Felder (@jessefelder) July 17, 2023
For this reason, it may be a good time to focus on hard assets in the investment portfolio.
The US is now running twin deficits that are as severe as those experienced during the worst parts of the Global Financial Crisis.
This factor has contributed to the recent weakness in the US dollar.
Of even greater concern is the indication that this represents an ongoing… pic.twitter.com/nOPCA0tfGy
— Otavio (Tavi) Costa (@TaviCosta) July 18, 2023
Investors, however, have been shedding these sectors in their manic move back into Big Tech (perhaps creating opportunity for the cagey contrarian).
Sector fund flows https://t.co/PjevAyMKjy via @SoberLook pic.twitter.com/88ul1qILdT
— Jesse Felder (@jessefelder) July 18, 2023
