Marc Faber recently went on CNBC stating that the US is heading down the path of high inflation as a direct result of the amount of money that the Federal Reserve has recently printed. Commodity prices have been rising as a direct result of the Fed’s behaviour. Apart from the rise in commodity prices as evidenced by the CRB Index, what other evidence is out there to support rising “inflationary expectations”? In essence the market is confirming what Faber is saying. Inflation protected treasuries are outperforming non inflation protected (both in the US and offshore), short dated treasuries (IEF) are outperforming long dated (TLT). Furthermore, emerging market stocks (EEM) are outperforming the US Stock Market (VTI) a condition that generally occurs during times of economic growth and rising commodity prices. All of these trends appear well entrenched with the 100 day rate of change being positive on all accounts. Whilst the 100 day rate of change remains positive for all four charts below we remain bullish on commodities (DBC & RJI).
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