AUGUST, 2017: OUR TOOLS SUGGEST TWO BIG MACRO IDEAS:
- Based on our long-term and mid-term models, Interest Rates should stay low, no matter FED, ECB or BOJ (see the link)
- Our BigData tools are also constructive on Industrial Commodities (link Buy on Energy)
These two statements seem mutually exclusive, right? No!
Why wouldn’t a higher inflation emanate from commodities, resulting in higher yields? Again, no!
That is somewhat true over a really long run, but in the short- to mid-term, Commodities and Bonds are very comfortable moving in the same direction a lot of times!
- Check our simplistic conclusions vividly displayed in shaded Green areas when a decline in Interest Rates is accompanied by rallies in Crude Oil prices: over the last 40 years (since 1979), 30% of the time US Interest Rates were declining when prices of oil were advancing!
- last 20 years (since 1997) it became 46% (almost half the time) of the time Rates were declining when oil was advancing
Therefore, it is extremely common for nominal Rates (not to mention the real Rates) to decline while Commodities are advancing.
So, stay alert for further (actionable) Cross-Asset insights that our tools spit out.
Please, see the image: