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2021 Triumvirate - yields, oil, $

Updated: Oct 31, 2023

2021 so far is is the triumvirate of Treasury yields, Oil and $ rallying. And Consensually

overowned big Tech and “cr*p and froth” underperforming and grubby non-ESG forgotten

value cyclicals rallying. A lot of this is simple 2yr mean-reversion.

Issue is make-your mind up happens now for asset allocators and managers with this degree of bifurcation. Right now it again seems fairly logical to Nutstuff and have held this line consistently coming into 2021: Economies are re-opening. Yields will still go higher to reflect this fact.

Pandemic Winners and others such as Tech/growth that relied on ultra-cheap money and Lockdown will recalibrate in price. Pandemic Losers and sectors that like recovery and higher rates, namely Energy/Commodities and Finance will continue to do better. Dollar doing better because itoffers a positive return because US is open and things getting better. Gold, JPY and CHF safe havens not required at the moment, hence these weaken. Weaker Euro helps Europe.

So, Oil is spiking again to $70+ after more Saudi drone attacks on the Ras Tanura oil terminal. (production capacity of @7% of oil demand). Meanwhile the Bond Vigilante crowd I think realise they have pushed the envelope here hard as 90% economists and strategists just plain wrong but “smart” macro buyside have made-out .

The 10yr can go above 2% unless Powell intervenes. At the same time the Dollar rally has also come a long way fast. Similarly the “Lets smash Tech” theme looks a tad stretched, but Nasdaq can and will go lower. Wont be helped by news MSFT has been hacked by Chinese.

Also the Nasdaq tail was toxic and ludicrously expensive as I had pointed out and the obsession with “disrupters” vs Nutstuffs stance on “enablers” has unwound here. That has been healthy. As both a growth and contrarian-oriented investor, I like Blue-chip enablers not disrupters, I like mid-cap names but underlevered ones and I dislike “Blue sky dreaming”.

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