Posted February 01, 2022
By Sean Ring
Monthly Asset Class Report
- Equities got destroyed in January. Tech, especially, got taken to the woodshed.
- Commodities scored a big month, but not metals nor crypto.
- Real estate fell, surprisingly, for me, at least.
S&P 500
What I wrote last month: A big Christmas rally sent the SPX up to all-time highs. This certainly isnt bearish. Right now, I cant think of a reason to be bearish, other than the Feds decision-making. As long as Powell doesnt rock the boat, expect this rally to continue.Well, he rocked the boat. Jay Powell did nothing to calm the markets. Hes intent on raising rates, and I think the market believes him.Nasdaq 100
What was that about tech stocks not liking inflation? The NDX takes a walloping. Unlike the SPX, it didnt regain its 200-day moving average, which means the algos still have it in their sights. February is a big month.Russell 2000 (Small caps)
Yes, we are off the map now. The small caps got hammered this month, and its likely this rally is over. The Russell retested the 50-day MA early in the month and was firmly rejected.Now, not only is the index trading below both the 50 and 200-day MAs, but the 50-day turned below the 200-day MA. Next stop: $160 or so. (Thats another 20% down.)The US 10-Year Yield
We also got our breakout in the ten-year yield. Now that were above 1.70%, the sky is the limit. If the market is that far ahead of the Fed, Im unsure what Jay Powell can do to stop the rally.Dollar Index
Ok, Ive updated JC Parets chart on the USD here. Early in the month, we bounced off that 38% level of 94.80ish and rallied over the 50% line. I thought wed be off to the races, but we traded back down immediately to 96.54.My best guess is that well dilly dally around this level before rates go up and we take off from here. Next stop: 98.20, with an eye on the all-important psychological level of 100.USG Bonds
Oddly, the TLT got crushed this month, which makes me feel better. Back down to 132, methinks. Update when we get thereInvestment Grade Bonds
What I wrote last month still holds, except the breather part. LQD got hosed this month.Lower highs and lower lows. Not indicative of bullish sentiment.This month, though, IG bonds took a breather. Im still bearish and expect them to fall off further in the coming months.High Yield Bonds
Well, after I got whipsawed last month, we resumed the selloff in junk. $81 is the high before the Covid selloff in 2020. If we approach that number, there can be big trouble.Real Estate
I must put my hand up. I got this one totally wrong, for reasons that completely escape me. Maybe it was too much too soon. But now, weve bounced off that 101 level and perhaps will make another run. I just dont see real estate getting hurt with inflation climbing like it is.Base Metals: Copper
Same old, same old. Dr. Copper is rangebound, unsure what to make of this economic mess. Again.Precious Metals: Gold
After a rally, back down we go. Yawn.Precious Metals: Silver
Another yawnfest. Many analysts are calling for a massive silver rally. I think they should stop smoking the hopium.Cryptos: Bitcoin
Got this one wrong, as well. But the bleeding may stop this month. I had written that $47,000 might hold. It clearly didnt. I think well see $30,000 before a sustained rally at least. But the kids are still long. Its the over-leveraged wealthy boomers who may have to sell it to cover margin loans that I worry about.Cryptos: Ether
I wrote last month:As ETH failed to break above its ATH on the last rally, it seems to have fallen into a downtrend.Im still a huge ETH bull, but right now, it doesnt look like were going to see a big rally anytime soon.Yup. In fact, ETH got hammered in January, but a nice little rally lately gives one hope.But I still dont think a sustained rally is imminent. We can easily see $1,800 before we head back up.Trad Asset Class Summary
Investors dunked on the SPX this month, with it finishing down 5.86%. As one would expect during these nutty inflationary times, commodities rallied hard, nearly up double digits. The USD was slightly up against its most significant trading partners, while bond prices fell.Bond yields and prices have an inverse relationship. With inflation rising and the market expecting a rate hike, this is normal behavior.Crypto Class Summary
While Monero won the Prettiest Girl in the Ugly Contest last month, its Januarys biggest loser. All the cryptos had faces like beaten favorites, so awful were their respective performances.We may be seeing a bottom, but I think weve got more to go on the downside.Wrap Up
Thanks again for your time.I hope you found the charts informative.As January was such a horrible month, it doesnt bode well for the rest of 2022.But well see if Powell and the Fed stay the hawkish course, or if Biden puts pressure on him to relax his stance before the midterms.Either way, strap yourself in.Ill leave you with this:
All the best,Sean
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