Powerplay

Quarantine your mind was my last week’s topic. I received many approving answers, and I would like to thank all those who are writing to me, keeping up the challenge. Thank you very much, indeed!

I received a comment that may be interesting for one or the other amongst my readers. The following comment came from Bob:

«what I have so far read about cyclicality suggests that assets like gold and equities move in opposite directions».

I replied the following:

“Now, as you may know, in statistics and with statistics you may underline almost every conclusion you want. This makes statistics such a powerful instrument. If you widen a period or if you do the opposite, you may come to very different results. I usually try to look at more extended periods. I am not particularly interested in the short-term. For the sake of argument, I have looked at the five-year performance of the S&P (https://marktdaten.fuw.ch/detail/indices?ID_NOTATION=4359526), which stands at +75.4% and the five-year performance of gold (https://marktdaten.fuw.ch/overview/commodities), which stands at +77.91%. To me, this looks like a very close correlation, even if during five years, the two asset classes did not always move in the same direction.” (The prices may have changed ever since I wrote my answer to Bob over the weekend; however, the 5-year performance has most probably not changed significantly).

Some weeks ago, I was looking at the Weekly Economic Index and its positive development over the last weeks. Now guess what, the trend continued, and the index rose to -2.7% versus -3.1% in the previous week. Also, the JOLTS (job vacancies) data was more positive. However, there is a delay in the publication of U.S. job vacancies data, as measured by the U.S. Bureau of Labor Statistics, the figures mentioned date from September. The U.S. inflation rate for October is 1.2% (1.3% was expected).

The recovery of the U.S. economy continues. The WEI is scaled to the growth rate of the past four quarters. (Towards the end of the year, it therefore increasingly approaches the expected growth rate of the calendar year). Furthermore, positive news also emerged from the side of U.S. consumer confidence, as the Bloomberg Consumer Comfort Index rose from 47.5 to 48.0 points last week.

Given the Covid-19 crisis, these are somewhat promising data.

By now, Ladies and Gentlemen, you may wonder why I would call this weekly mail “powerplay”. I called it powerplay simply because I believe the current powerplay in the U.S. government between President Trump and President-Elect Biden is a drag to the U.S. economy and because the current powerplay in the government about the terms of a new stimulus package is not helping the economy either and the powerplay between supporters and opponents of Covid-19 measures is not helping the economy whatsoever, just imagine what the economic figures would look like with sensible people from both parties managing that country. Do not forget, the loser of all these powerplays usually can be found among the average citizens. Frankly speaking, I can not think much of it.

Ladies and Gentlemen, please feel free to share your ideas and thoughts with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li
Many thanks, indeed!

And now, Ladies and Gentlemen I wish you a great day and weekend.

Yours truly,

Stefan M. Kremeth
Wealth Management
Incrementum AG

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li