Institutional Insights - BofA - The Flow Show
No Gridlock, no Goldilocks
Scores on the Doors: gold 31.0%, crypto 24.3%, stocks 18.1%, HY bonds 7.5%, cash 4.3%, commodities 4.3%, US dollar 3.1%, IG 2.8%, oil -1.2%, govt bonds -1.9% YTD.
The Price is Right: election reinforcing Wall St conviction trades of 1. long gold (inflation & populism hedge), 2. long tech (AI), 3. short Treasuries (debt & deficits), 4. short China (despite policy shift), 5. everything else a “rent”; conviction holds until a. recession (payrolls <50k) = “retreat” from stocks to bonds, b. election “sweep” & inflation (payroll >250k) causes Fed to hike not cut & reverse gold/tech leadership. Tale of the Tape: “can't buy bonds, can't buy breadth”…tighter financial conditions since Fed cut (UST yields +60bps, real rates +40bps) yet to ruffle stocks (EPS good) but once again killing "breadth" (Magnificent 7 = 50% of SPX 22% gain YTD); note 5% Oct drop in risk parity (RPAR) warning further FCI tightening won't be risk asset positive. The Biggest Picture: gold testing all-time highs versus global stocks ex-US (Chart 2), has outperformed NYSE (NYA) past 10 years, investors starting to chase (biggest weekly inflow to gold funds since Jul'20); we are bullish bullion but disorderly move up in gold & bond yields on election would reverse bull in Goldilocks.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!