INK Ultra Money: Inflation momentum is winning for now
Today, we hear from one of my favourite regular guests on Real Vision, Michael Gayed, author of the Lead Lag Report and manager of the ATAC Rotation Fund. Michael has a very straight forward process of looking at the market. He watches the relative performance of a few key indicators such as utilities, Treasurys, lumber, emerging markets and inflation expectations. It has served him well, particularly this year with his fund up about 60%.
According to Gayed, the big question mark facing investors is inflation versus deflation.
That is the same conclusion we came to early this year when we formed our pro-inflationary G versus D for deflation economy framework. For a recap, watch our free 90-second March 19 video summary of BNS Insiders bank on the G-economy. As it turned out, we sent out that report the day inflation expectations bottomed as measured by Treasury breakevens. Since that point, inflation-sensitive assets such as the Horizons Cdn Insider Index ETF (HII) have outperformed.
Based on what he sees now, Gayed expects inflation-oriented trades to be in favour for a while longer. Ultimately, he believes that deflationary forces will prevail but the path to the day of reckoning is going to include some inflation first which should support reflation trade assets, including emerging markets.
In our morning report today, we focused on a reflation trade stock, Pine Cliff Energy (PNE). The improvement in natural gas fundamentals has caught a lot of investors by surprise, which probably still makes Pine Cliff something to consider for those with risk tolerances for penny oil & gas stocks. Watch the video summary here (premium).
Finally, in the August 12th free Real Vision Daily Briefing, Ash Bennington talks with Robert Leonard, VP of Growth and Innovation at The Investor's Podcast Network. They discuss how some millennials approach trading in an eye-opening discussion. If Leonard is right, it probably helps to explain why the QQQ is up today even as bond yields continue to move higher. Somebody is going to get burned. Will it be the new millennials or the old school fundamentalists? I think we are going to get an answer soon.
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Disclosures: I hold Pine Cliff Energy and the Horizons Cdn Insider Indext ETF (HII) uses the INK Canadian Insider Index under license with INK.