Global

Unlike most advanced economies that are flirting with recession due to weak demand, the ‘inverted’ US economy is motoring along due to strong supply, from a combination of surging labour participation and surging immigration. We go through the implications for stocks, bonds, interest rates, and the dollar. Plus: IXJ, PEP, and MCD are good tactical outperformance candidates.

In the near term, favor oil and oil producers outside the Gulf Arab states. Over a 12-month horizon, favor US and North American equities, defensive sectors over cyclicals, and safe-assets. Within cyclicals, stick to energy and defense.

Gold and bitcoin are conceptually joined at the hip because the value of both comes from their ‘non-confiscatability’ by inflation, by bank failure, and in the case of bitcoin, by state expropriation. The sharp recent rallies in both gold and bitcoin reflect that the market has suddenly upped the value of non-confiscatability, and a plausible explanation is that recent US inflation data show that the journey to sustained 2 percent inflation has stalled, raising the risk that the Fed might balk at finishing the journey. Plus: JPM, CL, and USD/CHF are tactical reversal candidates.