The Fed Mandate is the Problem

Early morning thoughts..

How will the interest rate and equity markets react to this hot CPI number this morning. Who knows, but in the back of everyone’s mind is the belief that the FED will try to paper over the effects.

And, Later Comments today, where do investors hide now..

Where do investors hide now that the internet speculation has hit a roadblock, well that would seem to be is easy, invest in the infrastructure stocks, the stocks involved in steel, copper, oil, and earth moving, but oh no there apparently have been investors on this game since last April and for sure since the Biden election victory.

Here are two weekly charts that we have made into an index of four stocks that represent this sector, CLF, FCX, XLE, and CAT.

The first chart is a basic chart showing the April 2020 bottom and October 2020 acceleration point. Interestingly the highs were made on Monday this week and are lower for the week as of today.

The Second chart is even more interesting, it takes the index and divides it by the 10 year interest rate. This chart is one for Macro investors to study as it shows basis interest rates that the high was made in July 2020 and would appear to be making a big top. This would seem to indicate that from a trading standpoint if you are going to be in this infrastructure index you need to be short dollar for dollar in the 10 year bond.