Macro Observations

In this market, where the “magnificent 7” have been driving returns for more than a year, who in their right mind is selling mega-cap tech and picking up gold miner stocks? The answer would be someone who thinks something bad is about to happen in the financial markets and is positioning themselves much more defensively. Moving from tech into gold miners might be the ultimate growth-to-value pivot.

Stocks have been in a nearly uninterrupted uptrend for more than a year, which usually only happens when everything is simply clicking and everyone is optimistic again, right? Have the 31% and 61% rallies in the S&P 500 and Nasdaq 100, respectively, been justified? Many market pundits would say yes. I would say no. You have to look at all available data, not just the ones that confirm your own beliefs.

A big reason why inflation spiked globally in 2021 and 2022 was due to supply chain disruptions. The Red Sea conflict is creating another imbalance that puts the current economic growth cycle at risk. I suspect that companies now having to pay double and triple the shipping costs are going to try to pass those costs on to consumers again. The problem this time around, however, might be that they don’t have the capacity for it.