Thoughts about Gold miners.
Thoughts about Gold miners.
Pros
Cons
My view
Sector rotation
Do not know where we are in the economic cycle but it should be closer to the end of expansion than the beginning of it. For the last 3 months, Utilities was the best sector and Cyclicals was the second from the worst. For the last one month, Utilities, Basic Materials, Financial services were the best three while high risk sector such as Tech, Cyclical, and Healthcare lagged the market. Keeping those in mind, sector rotation model implies that we are about to pass the peak of an economic cycle. Risk appetite will move from high-risk to low-risk assets.
Inflation and Staples
I expect retailers will raise prices due to high demand this year. After people spent on housing and durables for the last two years, they will start spending money on other retail goods. I expect that the inflation would pick up this year.
Conclusion
In short-term, gold miners, such as AEM or GG, are not bad against possible inflation and the escalation of geopolitical tension in eastern europe. Lower growth rate in China will raise concern about its credit risk, too.
In sum, bonds' capital gains yield will be negative and stock market won't provide risk compensation. High yield short-term bonds will perform better than long-term bonds. Low-risk sectors in stock market will outperform the others. Gold miners can be good hedge against inflation and systematic risk.
Let me know how you think.
Pros
- Gold is near five year low.
- China's demand
- Putin
- Miners pay good dividends and financially solid.
Cons
- FED tapering and interest rate hike are negative for gold price.
- 200 bp rake hike in three years is quite certain.
My view
Sector rotation
Do not know where we are in the economic cycle but it should be closer to the end of expansion than the beginning of it. For the last 3 months, Utilities was the best sector and Cyclicals was the second from the worst. For the last one month, Utilities, Basic Materials, Financial services were the best three while high risk sector such as Tech, Cyclical, and Healthcare lagged the market. Keeping those in mind, sector rotation model implies that we are about to pass the peak of an economic cycle. Risk appetite will move from high-risk to low-risk assets.
Inflation and Staples
I expect retailers will raise prices due to high demand this year. After people spent on housing and durables for the last two years, they will start spending money on other retail goods. I expect that the inflation would pick up this year.
Conclusion
In short-term, gold miners, such as AEM or GG, are not bad against possible inflation and the escalation of geopolitical tension in eastern europe. Lower growth rate in China will raise concern about its credit risk, too.
In sum, bonds' capital gains yield will be negative and stock market won't provide risk compensation. High yield short-term bonds will perform better than long-term bonds. Low-risk sectors in stock market will outperform the others. Gold miners can be good hedge against inflation and systematic risk.
Let me know how you think.
댓글
댓글 쓰기