Precious Metals Skyrocket Amid Inflation Fears

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Posted: Jul 28, 2020 12:52 PM
Precious Metals Skyrocket Amid Inflation Fears

Source: AP Photo/Keystone, Martin Ruetschi

  • NASDAQ: +173 points or 1.67%
  • Dow Jones Industrial: +114 or +0.43%
  • S&P 500: +23.78 or +0.74%

That is how you start a week! All major equity indices were higher, led by the NASDAQ Composite. The market breadth was okay, although the volume was light. Tech buyers had the biggest ax to grind, sending the up volume on the NASDAQ well above the down volume.

Market Breadth

NYSE

NASDAQ

Advancers

1,786

1,974

Decliners

1,229

1,383

52-week winners

110

82

52-week losers

8

28

Up Volume

1.82 billion

2.51 billion

Down Volume

1.65 billion

1.37 billion

Utilities were down (not a big deal), but Financials were a major disappointment.

S&P 500 Index

+0.74%

 

Communication Services XLC

+0.69%

 

Consumer Discretionary XLY

+0.62%

 

Consumer Staples XLP

+0.50%

 

Energy XLE

+0.11%

 

Financials XLF

 

-0.82%

Health Care XLV

+0.75%

 

Industrials XLI

+0.42%

 

Materials XLB

+1.45%

 

Real Estate XLRE

+1.18%

 

Technology XLK

+1.58%

 

Utilities XLU

 

-1.21%

 

Sharing the Wealth

I have been waiting since June 8th for the S&P 500 to broaden out, and finally, there are 200 winners for 2020. This is the time to find names swinging from losses to gains on the year.

S&P 500 Winners:

  • 200 average gain: +18.48% 
  • The top 20 average gain: +63.08%          

S&P 500 Losers:

  • 305 average loss: -23.03%
  • The bottom 20 losers average decline: -60.68%

NASDAQ Winners:

  • 411 average gain: +52.90%
  • The top 20 average gain: +433.85%          

NASDAQ Losers:

  • 576 average loss: -27.87%
  • The bottom 20 losers average decline: -71.93%

Commodities Rally

We know about precious metals, but several commodities have taken off like rockets. It will be interesting to see what the Federal Reserve thinks about this, as I am sure there will be questions about the spikes and impending inflation.

I do not know if we are at the point of an inflation scare, or any circumstances that would hamstring the Fed’s ability to be even more accommodative:

  • Gold: +36.3%
  • Silver: +51.3%
  • Platinum: +7.2%
  • Soybeans: +2.2%
  • Wheat: +4.7%
  • Cheese: +41.8%
  • Milk: 39.6%
  • Orange juice: +19.2%
  • Coffee: +9.1%
  • Canola: +8.6%
  • Beef: +38.9%
  • Rhodium: +149.6%
  • Palladium: +48.8%

Lumber Stands Tall

Wood is universally beautiful to man. It is the most humanly intimate of all materials. 

-Frank Lloyd Wright

The housing demand and other uses for wood in the age of COVID-19, coupled with supply constraints, have sent lumber soaring. In the past three months, lumber has significantly outperformed Gold and Silver:

  • Gold: +11%
  • Silver: +60%
  • Lumber: +81%

The move is reflected in several stocks, including recent Home Depot (HD) results and pure lumber plays.

Portfolio Approach

Yesterday, we added a position in Materials yesterday, and we took an 11.1% profit in a Consumer Discretionary name in the Model Portfolio.  Our current cash position is 3 or 15%. 

Today’s Session

We are going through the avalanche of earnings and crunching the numbers, but one theme stands out clearly.

Coronavirus Lifestyle Changes & Earnings

Sprucing up the crib

·       Sherwin Williams (SHW)

Playing outdoors

·       Polaris (PII)

Move to the suburbs

·       DR Horton (DHI)

We expect these trends to continue. 

Four Dow component’s Pfizer (PFE), Raytheon Technologies (RTX), 3 M (MMM) and McDonald’s (MCD) all reported this morning.  All but PFE are a drag on the Dow.