Good morning,
In October, our Ultra-Growth portfolio handily outperformed the S&P 500, but Balanced struggled against its 60/40 benchmark. One of the biggest reasons? Our positions in short- and ultra-short duration Treasuries lagged as yields fell and bond prices rallied.
We didn’t make changes to our fixed income allocation, and as I explained in yesterday’s Playbook, 10-year yields are into a big zone of support where I expect to see stabilization.
However, I don’t want to completely dismiss the bond bull case, and today, we’re exploring the other side of the trade. Essentially, what if I’m wrong?
We’ll start with an important intermarket change recently: Commodity deflation.
Commodity deflation is showing up everywhere
Major false breakout for agricultural commodities
A few months ago, this was breaking out of a monster base. Now, it’s below the 200-day and has given up nearly all its YTD gains.
Lean hog prices down 50% since March
Cattle prices down 17% and at risk of breaking support
Wheat prices in a 22% drawdown since August
Base metals are also rolling over
