Short term outlook for the PP

[glennds]

I think it should be good based on more than one forecast that we may have a weakening dollar for a while:

https://www.cnn.com/2020/12/06/investin ... index.html

Does anyone else find the PP to be a bit of a hedge against the US Dollar in the sense that gold, denominated in US dollars will rise, and when gold is rising, the PP is rising unless something else abnormal is going on. Of course, bond yields will probably strengthen too which may hurt the Bond allocation, but not enough to offset gold. When I look at a historical chart of the US dollar index, it seems to correlate negatively to the PP's performance.

I know it's not a portfolio that times the market, but I've started to pay more attention to conditions with the question marks we have over bonds these days.

[pmward]

I think it should be good based on more than one forecast that we may have a weakening dollar for a while:

https://www.cnn.com/2020/12/06/investin ... index.html

Does anyone else find the PP to be a bit of a hedge against the US Dollar in the sense that gold, denominated in US dollars will rise, and when gold is rising, the PP is rising unless something else abnormal is going on. Of course, bond yields will probably strengthen too which may hurt the Bond allocation, but not enough to offset gold. When I look at a historical chart of the US dollar index, it seems to correlate negatively to the PP's performance.

I know it's not a portfolio that times the market, but I've started to pay more attention to conditions with the question marks we have over bonds these days.

The dollar and gold have actually been trading pretty correlated lately. The dollar and gold have been falling in unison. Days like today where the dollar is up, gold has tended to be up. Days the dollar is down, gold has tended to be down. If you're looking for a short dollar asset, unhedged foreign assets, currencies, or cryptos are the way to play it. Gold has more of an indirect relationship with the dollar.

Gold is really sensitive to real interest rates. When real interest rates were falling, gold was rallying. Now that real interest rates are rising (by becoming less negative) gold has been under pressure. Basically, at this point in time gold and the 10 year treasury are a similar trade only the 10 year treasury is correlated to nominal rates and gold is correlated to real rates and both are rising. Sometimes real and nominal rates move together (and in turn bonds and gold move together) and other times they move in opposite directions.

Currently I think stocks are the asset that will "save the day" and rescue the portfolio if both real and nominal yields keep moving up because real and nominal yields are going up for the good reason, that being improving economic expectations over the next few quarters. The dollar is going down for the same reason, since these improved economic expectations are global not just in the U.S. Since the USD is a defensive asset it means the trade is to sell safe dollars for more risky assets.