Tuesday Trends (12/29/20)

By Charlie Bilello

29 Dec 2020

The most important trends in markets and investing…

1) Equities

a) US vs. World ($SPY/$ACWX)

US stocks have been outperforming international equities for over 10 years. In early September this ratio peaked and started trending lower…

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b) US vs. Emerging Markets ($SPY/$VWO)

US Stocks outperformed Emerging Markets until the end of May after which EM has been trending higher on a relative basis.

c) US: Large vs. Small ($SPY/$IWM)

After many years of outperformance, large caps have lagged small caps of late. While the ratio of large to small actually peaked near the lows in March, the reversal accelerated with news of the vaccines in November.

d) US: Growth vs. Value ($IWF/$IWD)

Growth stocks have been outperforming value stocks since 2006. The ratio peaked in early September, but growth stocks have maintained a large outperformance YTD.

e) US: Tech vs. Broad Market ($XLK/$SPY)

2020 has been one of the best years ever for Technology stocks, and 2-year returns have not been this high since 1998-1999.

f) US: Momentum vs. Broad Market ($MTUM/$SPY)

High momentum stocks have had a very strong run of outperformance in 2020.

g) US: High Beta vs. Low Vol ($SPHB/$SPLV)

After many years of underperformance, High Beta stocks have outperformed Low Volatility names in 2020 by a wide margin. The recent move higher came after the vaccine news in November…

h) US: Consumer Discretionary vs. Consumer Staples ($XLY/$XLP)

The safety trade was brief this year with massive stimulus measures leading to an unexpected boom in consumer spending.

2) Bonds

a) TIPS vs. Treasuries – Inflation ($TIP/$IEF)

Inflation expectations continue to rise. After collapsing in March, the ratio of TIPS to treasuries has trended steadily higher.

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b) High Yield vs. Treasuries ($HYG/$IEI)

High yield credit spreads continue to tighten…

c) Leveraged Loans vs. Treasuries ($BKLN/$SHY)

Leveraged Loan spreads continue to tighten…

d) Investment Grade vs. Treasuries ($LQD/$SHY)

Investment grade credit spreads continue to tighten…

e) Long Duration vs. Short Duration ($TLT/$SHV)

As longer-term interest rates are starting to move higher, the ratio of long duration to short duration bonds is moving lower…

f) US Yield Curve (10-year minus 2-year)

After inverting in 2019, the Yield Curve has steepened in 2020 with short rates plummeting (Fed cuts to 0% with promises to keep them there) and long rates slowly moving higher…

g) Emerging Market Bonds vs. Treasuries ($EMB/$IEF)

Emerging Market bonds continue to trend higher after collapsing in March…

3) Commodities

a) Gold vs. Broad Commodities ($GLD/$DBC)

Gold was the commodity leader during the February/March crash but has since trended lower.

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b) Copper vs. Gold ($GLD/$JJC)

The resurgence in the industrial economy is evident in Copper’s continued strength relative to Gold.

c) Gold vs. Silver ($GLD/$SLV)

After a sharp reversal in March, Silver has bested Gold in 2020…

d) Lumber vs. Gold ($LUMBER/$GOLD)

The US housing boom continues with the ratio of Lumber to Gold hitting new highs…

4) Currencies

a) US Dollar vs. Major World Currencies ($UUP)

US Dollar continues to trend lower as the US national debt is set to spike higher once again (passage of $900 billion stimulus bill) and the Fed continues to buy assets at an unrelenting pace ($120 billion per month).

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b) Japanese Yen vs. US Dollar ($FXY)

Trending higher…

c) Emerging Market Currencies vs. US Dollar ($CEW)

EM Currencies collapsed during the covid crash but have since recovered all of their losses.

5) Crypto

a) Bitcoin vs. Ethereum ($BTC/$ETH)

Bitcoin has outperformed Ethereum during its latest run to new highs but is underperforming on the year.

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b) Bitcoin vs. Litecoin ($BTC/$LTC)

Litecoin has had a strong run of late but is underperforming Bitcoin YTD.

c) Bitcoin vs. XRP ($BTC/$XRP)

This chart is bananas due to the extreme volatility in XRP (most recently, to the downside while Bitcoin has gone vertical).

6) Intermarket

a) Stocks vs. Bonds ($SPY/$AGG)

Stocks continue their outperformance vs. bonds…

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b) Stocks vs. Commodities ($SPY/$DBC)

After a surge higher in March in April as Oil collapsed, the ratio of stocks to commodities has traded sideways since.

c) Bitcoin vs. Stocks ($BTC/$SPY)

The Fed continues to do its thing (buy assets, suppress interest rates). The US Government continues to do its thing (borrow and spend). Bitcoin continues to do its thing…

d) Bitcoin vs. Gold ($BTC/$GLD)

There’s a new gold in town…

e) Bitcoin vs. US Dollar Index ($BTC/$UUP)

Just for laughs…


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