-> The collapse of bond prices, $ZB has broken down from a which implies interest rates are on the rise again. All these talk of whether if the current is transitory or permanent is just a distraction, the fact remains lots of fiscal stimulus is being pumped into the real economy (versus the Fed’s funny money which stays on bank balance sheets as reserves) and the US is a twin deficit economy. So don’t take Japan’s experience with deflation as the default template; Think more Latam.
-> $EURUSD has broken out of a > decade long downtrend. That is significant and expected as interest rate parity tells you currency of a high yield economy gets sold therefore we are definitely in a weak USD environment. This creates a nasty feedback loop into as every other commodity is priced in the USD and the US is an import economy (only major exports are agriculture-based) so as rates go higher, USD gets weaker and goes higher.
On a side note, I would not go chasing after as an hedge for now. have largely priced in the weaker dollar and have surged so much that narrative switches to potential oversupply and demand destruction. Quick scan of hard and soft shows significant tops being put in with lower highs or exhaustion tops. This is not a demand driven commodity super-cycle so at some point, producers are just going to forward hedge their production en-masse and factories will slow purchases and find alternatives.
Other things to think about:-
-> retail margin is back at extreme levels and as assets with conceptual (eg. BTC , Telsa etc) get sold, watch out for margin calls.
-> The Indian Covid-19 variants are extremely contagious and most probably airborne. As I am given to understand, there are still 4 daily flights between the US and India, domestic air travel in the US is at peak levels while large parts of the US remain resistant to safe distancing protocols. These combined is a bad cocktail mix that the market has not priced in.
Helmets on, as usual, happy hunting and stay safe.