Over the past few weeks, I’ve been adamant that the Fed is playing a dangerous game on the inflation front.
Starting another round of money printing before long-term inflation targets have been achieved isn’t just reckless, but borderline negligent.
So, I’m not surprised to see that an inflationary sector led the market again last week. It’s not a full blown “head for cover” alert, but rather a signal that storm clouds are gathering on the horizon.
Have a look…
The Fed Poured Gas on the Inflationary Coals
After being overtaken by basic materials (XLB) the previous week, energy (XLE) was right back in the one-week leadership spot in the sector performance rankings.
This means that the last three weeks has seen inflation-related sectors emerge in the one-week leadership roles. This reinforces the notion that the Fed is pouring gas on the coals of inflation. If enough embers remain, it could explode into a full-blown fireball.
But it’s not all bad news out there in terms of sector performance.
I’m most pleased with technology (XLK) emerging as the one-month leader in the market. In previous posts, I was adamant about tech needing to reassume some sort of leadership in this market.
Now that we’ve finally got tech showing up on the scoreboard again, it gives me a greater level of confidence that this rally is sustainable.
Never forget – a bull market climbs a wall of worry. There is no shortage of reasons to be bearish right now, but I’ll let the pundits worry about that.
In the meantime, I’ll help you stay focused on what matters the most – price, time, and the market’s internals. All are pointing to higher prices for now.
Talk soon,
Gianni
