Interview with Brooke Thackray

June 13, 2022No Comments

Keith: Hello everybody. And welcome once again to the Smart Money, Dumb Money Show. Couple of changes here, as you can see, I’m seated. I’m normally standing when I do these shows, I’ve actually had people email me and say, why do you always stand when you do your shows? And quite frankly, it’s just because I get tired of sitting down all day. So I use the show as an opportunity to stand up. So, as you can see on the screen, we have a guest with us and I noted this in my blog this week. Many of you that watch this video read my blogs. And I noted that Brooke Thackery, who is a research analyst with Horizons would be joining me today. And this was inspired by both a newsletter that Brooke puts out monthly and a conversation that I had with Brooke just around the time of him publishing that newsletter, which talked about some seasonal cycles that kind of melded in with the way I have been talking on my blog.

Keith: And yet there’s some, some things that I learned from our conversation and from Brooke’s newsletter that I think I would rather have it come right out of the horse’s mouth. Meaning Brooke’s mouth. Not that I’m calling you a horse Brooke, but I would like Brooke to explain some of the seasonal cycles that tie very well into some of the technical observations that I’ve been making and he can hopefully cover what he was talking about in a much more eloquent way than I could. So I’m going to give the floor to Brooke and we’ll be bantering back and forth, which is why I’ll leave the screen so that you can see us both all the time. And I’ll pass it over to Brooke. And just start off with the basic question, which is the question on everybody’s mind, you know, is this pullback that we have recently seen on the market a one-and-done? Is it over? Is there more to come? And what about the seasonal strategies and how does all this tie into your view of the market, Brooke? So take it away.

Brooke: Yeah. Okay. Well, thank you, Keith, for having me on the show. You know, we’ll talk a little bit about some of the things I’ve written in my books in the past, and also perhaps in some more recent writings, but I want to focus on really what’s happening in the markets now because we have seen the market drop down on the S&P 500. On an intra-day basis, it’s gone down by over 20% and then bounced back a little bit from there. You know, what’s going on? And you know, how does this fit within the seasonal trends of the market? Let’s step back a little bit and take a look at the bigger context, and let’s go back to 2008, and 2009. At that time, the Federal Reserve was coming in and flooding the market with liquidity, lowering interest rates.

Brooke: And even after that, you have to go back, you know, out a few years in 2000, you know, 12. I mean, they still had extremely low rates and refused to raise them, you know, at any pace whatsoever. And that was through Bernanke and then into Yellen and Yellen dragged her feet out. So the Federal Reserve has been extremely accommodating in the markets and that’s now changed and you know, maybe it is just for the short term, and that’s a big debate that’s going on. But the reason I bring this up is we were in this unusual environment from 2009 where, you know, when the market was following a seasonal pattern, it did go down in the summers a lot, but guess what, the Federal Reserve would come in and go, oh, we have to protect the markets. And that’s when they announced a lot of their QE plans and, you know, they’ve cut interest rates, or they would, you know, leak some information about, you know, further easing to help support the markets.

Brooke: So we’ve seen this since really two thousand’s unnatural boosting of the markets in the summer months in a strong economy and not a strong economy, but in a strong market. And I’ve said in this period, the Federal Reserve is my best friend because it’s raised rates, sorry, lowered rates, and stimulated the markets, but it’s my worst enemy because it keeps doing it in the summer months. So where’s that put us now? Well, the Federal Reserve has come out and said, well, actually we’ve changed. You know, we’re on a tightening cycle and you know, maybe they back off on some of their hawkishness over the summer as the market perhaps does take a little bit of a hit. But they’re not going to be cutting rates this summer you know that’s not expected by anybody.

Brooke: So I think that are we finished? No, I don’t think so. In the past, we’ve seen the moral hazard where everybody says oh, let’s go buy the dip, you know, and that would happen in the summer months. And I don’t, we haven’t seen buy the dip work, Keith, you know, here at all. I mean, you know, one of the things is you and I both know when the market comes down 10%, all of a sudden the media goes 10%, the market’s on sale. It’s 10% off and that didn’t work at all. And you know, and then next thing you know, it goes down to 20%. It’s 20%, the market’s on sale. And we haven’t gotten past that yet to say that that’s the case. And we can look at some of those numbers a little bit later on, but that’s, we’re really, we bounce off that 20% from the January 3rd high around almost 4,800, but can the market go down further?

Brooke: Absolutely. Just because it’s come down 20% doesn’t mean it can’t go down further. And there are a lot of headwinds in the market. You know, I just talked about the Federal Reserve, but there are a lot of other headwinds, high inflation you know, consumers having to cut back. We’re seeing some softer data in the PMI numbers. It’s actually coming through in some of the harder numbers like GDP as well. So it’s mutually exclusive. Just because something has come down a lot doesn’t mean it can’t go down further and, you know, really you have to focus on what you do as a discipline. And for me, that’s, you know, is seasonal and this is the time when the market tends to be weaker. I mean, there are some pockets where it can be strong, but in these six months from May to October it tends to be the weaker six-month period .overall, and that’s also true in midterm election years. And that’s where we’re at right now, particularly for that as well.

Keith: So let me interject here and a hundred percent, we’re both on side that, you know, the bottom quite possibly hasn’t been seen yet. One of the things that inspired me to do this interview was both our conversation and your comments about a blip possibility and I’m calling this a tradeable bounce. People that read the blog and follow this video know that I’ve been talking about a tradeable bounce. Now I noted a few candlesticks on a blog a couple of weeks ago and so far we seem to be getting a little bit of a bounce. Keeping in mind what Brooke is saying is that the market is not necessarily returning to a bull market anytime soon. But part of our conversation, Brooke, was that there is a seasonal period that may last two, three weeks, whatever that can give you a little bit of upside. So could you maybe bring me back to that conversation and talk a little bit about that quick blip that you see midsummer?

Brooke: Yeah. Okay. So just as one of the examples, I did a lot of research back in the 1990s and I talked to, I came up with a theory about end-of-month trades. And, by the way, I wasn’t the only one that had done research on this at the time as I did more digging into it. And the stock market very often will rally towards the end of the month and on a statistically significant basis on the last couple of days. And the big days in the market tend to be the last couple of days and the first couple of days of the next month. And that’s a known seasonal phenomenon. And what we saw was with the market pulling back towards month-end, you know, I said that buy the dip hasn’t been working, but a lot of people towards month-end said, oh, the market’s really on sale.

Brooke: And they jump back into the market. So. this is the S&P 500. Let’s just zoom in a little bit on this here. I’ll just take it down to two years here on this. And if we take a look here, we can see that here’s May. So, well, let’s take a look. Here was April. We saw April go down a lot and we saw May go down a lot as well. So when you do see this, a big downturn in the market during the month, very often you’ll see the stock market rally towards the end of the month as money managers have to deploy the cash that they have, and they say, well, now’s a good opportunity.

Brooke: It has come down on a month-end basis. They have to make their allocations to adjust for their statement. And then towards month-end for May, we saw that really strong rally. Now, this doesn’t show the intra day basis of volatility that was taking place. And we saw the first couple days in June, we’ve seen some oscillations go back and forth. So this is really a month-end phenomenon. And this is actually the pattern for June on a seasonal basis from 1950 to 2021. You’ve seen the first couple days in May rise, a weakness during the month, and then towards the end of the month, you saw it take higher. And even if we go back and take a look at that. So in April, we saw the same type of thing. It all happened at the beginning of May itself.

Brooke: But when you see a big pullback in the month for May, that can lead to a good opportunity. Now what’s important about this is we’re might be doing what I call a rinse and repeat. And Keith, I agree with you. That was a tradeable bounce that we saw, and we might have the same opportunity, even though we’re in this unfavorable six-month seasonal period for the stock market. We may actually have the same type of opportunity coming up as if we see a big correction in the month of June. So the market tends to do extremely well. So actually one of the stronger periods for the stock market, and I’ve written about this, is in the last few days of June into about mid-July the stock market tends to do well. Why? Well, we just talked about the, you know, what happens around the end of the month, but July is also special because it’s an earnings month.

Brooke:  And so January, April, July, and October are all earnings months. And what you find on a seasonal basis is the stock market can rally coming into earnings. On average, in fact, on average being positive has a fairly high success rate of frequency being positive. So we could see another tradeable balance. We could do what I call a, you know, rinse and repeat where the stock market, you know, does the same type of phenomenon over this month end. And this would be particularly attractive if we see a big pullback in the month of June, which could take place because on a seasonal basis during midterm election years, it tends to be a weak month for the S&P 500. So we may see another tradeable bounce opportunity coming up.

Keith: Okay. So actually speaking of the election cycle. So I sometimes talk about this as well, but you’re the expert on this and so I wanted to ask your opinion. As I recall in the second year when we do the midterms, the market can be a little soft on a regular basis for the first half to two-thirds of the year. And then usually you get a pop in the last quarter. Maybe I guess after the midterms finish up. Is that true? Like I’m just going back to a chart that the Dow Jones company puts out on seasonals and I just want to know what your, if your research backs that.

Brooke: So yeah. So first of all, why does this work? Why does the stock market tend to perform poorly before the midterm election? And what’s the overall trend? It’s just like the election. If we just go back even to the last couple of elections, what we’ve seen is the stock market performs poorly up until just before the election or when Donald Trump was elected just as he was elected, but the typical pattern. And so why does the market go down before, you know, before the election takes place? Investors, don’t like uncertainty and they just don’t know what’s gonna happen. And right now sure. You know, according to all the polls, it looks like the Republicans are gonna dominate the midterm elections, but there’s still some uncertainty around that. And it hasn’t, I believe it hasn’t actually affected the markets yet because there’s been so much other stuff going on with talk about inflation and the Russian-Ukraine war.

Brooke: And I think once the media starts playing this out a little bit more it will have that negative effect and investors tend to push the market down when there’s uncertainty. And that’s what happens. Now, ironically, in midterm election years, you find that at the end of September, the stock market tends to rally. Now the midterm election takes place on the first Tuesday of November. So before that takes place. So at that point, the stock markets pulled back, it’s baked into the price. Investors are past the issue. They sort of know what’s gonna happen. And the stock market tends to rally and they play the cycle and say, okay, you know, we have to get in now before the election to make sure we’re there because stock market is going to go up after. That’s the way they view it. And so from a seasonal basis, you wanna be in before they get in.

Brooke:  So the actual rally takes place before the election on average, and it can be a quite strong rally and then continues on until the end of the year as well. So as much as, you know, I’m talking about the market, you know, we’re in the soft period for the stock market, soft six months. The stock market tends to head down this time. There is some perhaps a good opportunity if we do see a big pullback in the summer months. For the favorable six month period, perhaps even starting early this year, late September to actually perform exceptionally well as well at that time. It’s possible. Of course, we’re not there yet, but that’s, on a seasonal basis, that’s something we look out for.

Keith: Yeah. Well, that’s right. You know, you never know, but these trends can help you, especially when the charts back it up. So it’ll be interesting to see. I think we’re on the same page that there’s maybe some short-term opportunities here and there over the summer, but generally speaking, it’s gonna be a less pleasant environment for buy and hold investors. But I think it’s a great environment for those of us who are willing to trade here and there. And then that presidential cycle might just end up helping us too. We’ll see. So I’m pulling up my list of questions that I wanted to ask you. One of the things, well, actually, I’m gonna skip, I’ve got a bunch written down here, but one of them I wanted to talk to you about was bonds before we get into it, because.

Brooke: Why do you wanna talk about bonds? Everybody hates bonds.

Keith: You know, let’s talk about because there’s this Fed thing going on, right? So yeah. Okay. So where do you stand on bonds? Normally, it’s a seasonal thing to buy fixed income and high-interest utilities and that type of thing over the summer. What about this time?

Brooke: Yeah, so, I mean, look, bonds have done terribly in 2022. From January, it’s just been absolutely creamed, but that’s when they don’t do well on a seasonal basis, really. You know, at the beginning of the year, that’s not a time to own government bonds. Look, I don’t like bonds. I don’t love them. I mean, who really loves them. I mean, when they are paying so little and, you know but from a seasonal perspective, you still have to respect the seasonal trend and they attempt to do well from early May until early October and particularly with quite a high-frequency rate of success as well. And that’s really, you know, the real sweet spot for that trade is August and September. So, you know, even if we sort of flounder around here a bit, we could see bonds actually do particularly well.

Brooke: Now a lot of investors, you know the question I get asked, Keith, a lot is like, well, how can bonds do well if the Federal Reserve is raising rates. If they’re raising rates, yields have to be going up. Well, it’s a lot more complex than that. And if the economy’s slowing down and you know, investors may say, well, a slower economy means that the yields should be lower. Of course, inflation expectations of pushing up on the other side, but it’s totally possible to have a situation where the Federal Reserve is raising rates at the short end of the curve and yields actually going down at the ten-year or further out. I mean, that’s totally possible. And if we see, there hasn’t really been an exception, expectation change in the narrative with investors. I think investors really have been buying the debt mentality, and that hasn’t worked as well as they expected, but, you know, and there’s some talk about a recession in the, you know, in the newspapers a little bit, but I don’t think that that’s the overall narrative for the market.

Brooke: I think investors are really just stuck and going we don’t know, you know, like this is weird, you know, we’ve never been here before. We’ve got high inflation, you know, and growth, well, most investors see it as, well it’s just, we’re just hanging in there, but I think we’re actually showing signs of slowing down and we wanna take a look at it from all the data that I look at. I know, Keith, you look at a lot of high-frequency data here at the front edge of that, but, you know, from the data I look, I do see some slow down. And so what I’m saying is, I don’t think the acceptance is being out there that the economy is slowing down yet because we’ve come off this rapid rate of acceleration from artificial means really, that’s ended and now we’re still growing but you have to watch that downside on that curve.

Brooke: And I think the narrative does change it at some point. So bonds can actually do well in this seasonal period. Right now, you know, we saw May the bonds actually were positive. The 10-year government bonds were actually positive in that period. We’re seeing a little bit of a pullback now as the rates have been bumping up again. But I think they’re reasonable. I’m not in love with the actual trade. Even though it’s seasonal, I think it has to still be respected. But if we do get more data coming out and saying, and the narrative changes that the economy is slowing I think bonds could actually do okay here.

Keith: Yeah, absolutely. I mean, you know, right now the market seems to be baking in that the Fed is full throttle, raise the rates and get that inflation down. You remember that inflation was only supposed to be transient and now it’s not. So they’re full throttle now. So actually there was a statement, who was it? I’m wondering if it was actually Biden, who’s just echoing, probably Yellen. But we said that gee inflation may be with us for a lot longer than we thought. This is something this morning I read, but when it comes to bonds,

Brooke: Keith, you know what, it’s funny because you mentioned that too, just on the whole thing with inflation. I think the expectation for a lot of people out there is inflation’s high and look, and even if it has peaked, okay, and there’s the whole debate around that. It’s still high.

Keith: Yeah.

Brooke: Okay.

Keith: Absolutely.

Brooke: It just doesn’t go back to 2% and by the way, the inflation, even if it did go dead at 2%, doesn’t mean that everything that went up in price is all gonna come crashing back down either. There will be some things that will come down, but on average it just means that prices are rising less, you know, not as fast. That’s what it means. Yeah. And so I think, yeah, I think we’re trying to position people to say, hey, you have to accept this inflation that’s really, yeah. Oh, it might have peaked, but it’s gonna hang around a bit.

Keith: Yeah. It’s like mosquito season. They go away after a while.

Brooke: Yeah. And they both bite.

Keith: So and with that, by the way, the idea that bonds might do okay August to September kind of jives with, you know, if you think about what the Fed is doing, a lot of their, you know, they have both Fed speak and Fed act, right?

Brooke: Yeah.

Keith: So as you know, so this is a personal opinion. This is not the technical analyst speaking, this is just Keith talking, but you know, a lot of the banter by the Fed may just be, you know, they may have talked down inflation as much as they’ve acted through higher rates and whatnot over the summer. And maybe a lot of that is kind of baked in or finished or whatever or at least baked in by the time the bonds might rally a bit. So, you know, that would maybe make sense by the end of the summer. So, you know, nobody loves bonds, so we don’t have to spend a lot of time there. So it brings me to the next question, what sectors do you love right now?

Brooke: Well, it’s a tough market because we’ve seen, you know, the engines that have driven the market higher over the years, the growth sectors, really pulling back. You know, everybody would run to technology basically. You know, that was the hotel, the hedge fund hotel. They didn’t know where to go. They just buy XLK and that’s all changed and the rates are rising so it makes it this difficult environment. Because if you think about it, you know, rates rising, that’s gonna hurt growth stocks technology, because when you’re buying technology, you’re buying at a long stream of earnings in the future on a discounted cash flow basis. As rates rise that becomes the stock actually becomes worth less. So you see technology getting hit hard on that. And, you know we’ve seen commodities do quite well overall, and that’s why the Canadian market has actually been outperforming the US market in 2022.

Brooke: But so as far as those sectors go, the cyclical sectors, we’re not in season for those. And if we’re seeing a slowing economy, that makes it, it makes it tough as well on those sectors. So you go, well, okay, the growth isn’t there. They’re out of the seasonal period. It’s not a favorable environment. The cyclicals, we’re seeing some data that says, Hey, you shouldn’t be there. And on top of it, it’s not seasonal. So really this is the time for the defensive sectors, but the defensive sectors, the difficulty with them, Keith, is rising rates. They’re gonna have their toll on them too, because they, you know, a lot of times it’s a dividend yield play. So maybe there are some slight out performances. And you know what we saw back, let’s go back to December 2021 and if we take a look there, actually, maybe I can pull that up on a graph here.

Brooke: So here are the defensive sectors, and I wanted to show what’s going on with the defensive sectors. So let me just draw a couple lines here for you. This is the S&P 500 and red is utilities, that’s utilities and blue is healthcare and green is consumer staples and then we’ve got the REIT sector here. Let’s go back to 2021 December. If we take a look here, this is a relative to the S&P 500. So when this line’s rising, it means these sectors are outperforming.

Brooke: Well, what I found interesting was that we saw that the yield on the 10 treasury note was rising. Now, that’s usually not favorable for the defensive sectors, but they still outperform. So when it’s rising, they’re outperforming and the S&P 500 was down. Like, how often do you see that when the yield is rising, yields are rising, the market’s rising, and defensives outperform. What it was telling us was that investors want to stay in the market, but they were getting really concerned. And look, what happened in 2022 as we started, we saw that tail off and the defenses overall did okay. And then we’ve seen this outperformance here once again for the defensive sectors, but as the S&P 500 has risen here, we’ve seen the defensive sectors actually underperforming a little bit recently. And this last a little bit, if we take a look here, this is when yields have been rising and that’s particularly hurt some of the defensive sectors on a relative basis.

Brooke: So what I’m trying to say is that I would not, what we saw previously in December, was a really big warning signal, cuz the market was moving up, defenses were moving up and yields were rising. Like it’s like, wow, that was a real signal. But what’s happening now is yields have been moving up and defenses have been underperforming as the market goes back and forth a little bit here. So we may see a burst. If we see the market turn down here, we may see a burst where the defensive sectors outperform from here. But I don’t expect substantial outperformance. The defensive sectors aren’t the be-all and end-all like back in December when they just, the utilities that were amazing. They had a huge, they were the top-performing sector in the month of December.

Brooke: Yeah. I don’t think that’s the case here. So what I’m trying to say is this is a little bit of a difficult market right now. But I still do think the defensive sectors are some of the places that you should be. Biotech as well. If I can take a look and pull up biotech as well on this. It’s another one that we should be taking a look at here. If I’ve got it here on the screen somewhere. Yeah, I do. Look at biotech. In this case here, I’m using IBB. Once again, this is relative to the S&P 500 and this is biotech by itself on an absolute basis. So when this line is falling, that means…


Brooke: So here’s the biotech relative to the S&P 500 and here’s the biotech itself. And what’s interesting, here’s 2020. Biotech, you know, as we were coming in, you know, the pandemic everybody’s rushing in, oh, the biotech, you know, the therapeutics vaccines and everything else. But look at this underperformance since then, it’s been spectacular. But I love the biotech sector because it tends to do extremely well, and I’ve written about this in my book, but it tends to do extremely well in the month of July. And it starts a strong seasonal period from June 23rd until September the 13th. And even if we go back and let’s take a look, here’s 2021, here’s biotech, and let’s go back and take a look. Here’s, even though it has this big trend of underperformance from June into mid-September, look at this, it outperformed.

Brooke: And once it finished its seasonal period, it underperforms and Keith, I know you know this, but when you have a base building, you know, the longer the base the greater the case. You know, there’s a lot of sayings that go around that. So we’re seeing this base building relative to the S&P 500 and right before the strong seasonal period. And so I think this will bode well for the biotech sector to perform well in its strong seasonal period which comes up shortly as well. So yeah, the defensive sectors, I also think biotech is another sector that could do well in its strong seasonal period, particularly in the month of July. You know, there’s a lot of stuff, exogenous stuff going on in that sector, of course, you know, that didn’t exist before with some of the companies making vaccines and stuff. But nevertheless, it’s definitely one to keep an eye on for sure.

Keith: Okay. That’s good. Actually, I’ll disclose here that at ValueTrend, we have two equity plans. We have a more conservative one, which is really our bread and butter. But we have a small, we don’t promote it a lot, but we call it VTAGS, ValueTrend Aggressive Strategy, and it’s been doing quite well. You can always go to our website and look at the performance, but it’s volatile. And we just, we did buy some biotech ETF. Not the one you mentioned, Brooke, we bought the XBI, which I think that’s what the ticker is.

Brooke: XBI, yeah. That’s the State Street one. Yeah. Which is also good.

Keith: Similar looking charts, but anyways, so it’s a sector that we, yeah, I agree with you. Seasonals are good and the sector looks a little oversold to me. So we’re looking at, funny you’re mentioning that it’s maybe a one or so month play, and that’s exactly what we’re looking at it as is just a, you know, one and done in and in and out sort of trade. So, good. And speaking of non-traditional assets, so I wanted to talk to you about gold. I will disclose, funny enough, by the way, we sold some of our, I mentioned this to you, we sold some of our energy at ValueTrend. We made a ton of money on it since 2020. We still have some exposure but we’re down to literally 40% of what we had.

Keith: Like, we have sold quite a bit. Not that we don’t like oil, but we just made so much money on it and we think it’s overbought, but we did rotate into a defensive sector. We already have defensive stocks, but we rotated some more. And the other thing we’ve been buying a little bit of is gold and so I wanted to hear your opinion. Now you can tell me, I just did everything wrong and I shouldn’t buy gold, but you go ahead and shoot me down if you will, but I’d like to know your opinion on gold.

Brooke: Yeah. Once again, for full disclosure, the fund that I work with HAC, ticker symbol HAC, Horizon Seasonal Rotation Fund ETF. It trades on Toronto stock exchange. We do have US government bonds and we do have a biotech as well in the fund. And on top of that, we do have a position in gold as well. So gold, I think, you know, gold is actually doing really well at the beginning of the year doing nothing. You know, it’s one of those times, if you take a look at gold, it’s kind of interesting. Yeah, I’m gonna, once again, this time I will start to share my screen. Okay. So let’s go here and pull this up and let me go to gold here for this. Here’s gold. And if we take a look at a couple of the, this is relative to the S&P 500. I don’t have what’s happening with the yields on here or the US dollar, but what was happening with the US dollar was, we’ve seen a rise in the US dollar relative to world currencies, and we’ve seen interest rates rising, but at the same time, if you take a look at was happening gold. Here’s gold. Here’s gold relative to the S&P 500. Gold was actually outperforming the S&P 500.

Brooke: Now this was an environment with rising US dollar, rising interest rates. And when those two happen that shouldn’t take place, you shouldn’t see that take place. And we’ve seen gold has pulled back, but on a relative basis, this has really been performing at market. If you want to compare those two. So given the environment that it’s been in, gold’s actually done okay. I mean, it’s really back to, if you take a look here, we’re back to close to where we started the year with. If you wanna take a look, this was the invasion of Russia into Ukraine. So we saw that bump and we see it come back and then we’ve given that back up. On an absolute basis, we’re close to support level, which is about 1780 right now. We’re about 1850.

Brooke : So we’re just above that, not too far. And I think that gold can do well. Just so what we were saying earlier on about the interest rates. So if interest rates do come down, you know, perhaps later on August and September, and that’s really sweet spot for the next gold trade cause usually gold tends to do well from, you know, early July into late September is typically that the real sweet spot for that trade. So I think that gold can still perform well in that time period. It’s also, you see the biggest demand for gold taking place in the fourth quarter of the year. So supply remains constant, demand goes up, which helps to boost that overall. And see it has to do with the Indian Diwali New Year. It’s more than that though. That’s when we consume most of our gold, gold jewelry on the margin.

Brooke : But there are a lot of other factors taking place. So we see interest rates do pull back. I think gold can do really well. And quite frankly, you know, the US has printed 40% of its currency into existence in less than two years, you know, so, and that hasn’t rallied gold that much. So, you know, and it is typically been in an inflation hedge. Sometimes it just doesn’t sync up right away. But really the key is to look at when does tend to do well on a seasonal basis and we are getting to that spot right now, and June tends to be a volatile month for gold. And so we can see some big ups and downs and that’s sometimes a good time to start picking it up when actually does pull back down. So it is possible for that to take place.

Keith: Yeah. Well, thanks for that because yeah, we view gold, it’s interesting, it is a hedge against a dollar, which. like you said, the US dollar’s been strong. So certainly it was really interesting to see it go up when the dollar was certainly not going down, but whatever the case, you know, we at ValueTrend, played the inflation again very well. We started 2020 and we’ve outperformed the market by an order of magnitude because of that trade. But we do feel that the whole inflation trade is now a little long in the tooth, but the one, so we’ve been paring out a little bit at a time. We, as I mentioned, we reduced a lot of our energy recently. Still have some exposure, but because we do like the trade long term, but whatever the case, we do think that whole, like there’s a lot of say a crowded trade.

Keith: A lot of individuals, I often like to say with Sentiment, because I do a lot of sentiment work as anybody watching this, and Brooke, is well aware. Brooke actually wrote a chapter in my or a section in my sentiment book that I recently published Smart Money, Dumb Money. So one of the things I like with sentiment is that it’s kind of like an elevator and when there’s too many people, an elevator has a capacity. If it’s meant to hold 20 people and 25 people are on the elevator the elevator’s in danger of crashing. So that’s the way I felt right now about the inflation trade. It’s like, it’s not that it’s a bad trade, but it’s like, everybody’s on board and that’s when I get worried and you’re starting to see this in the actual sentiment indicators, but gold on the other hand, it’s not a crowded trade. I mean, Brooke just showed, it’s been relatively sideways, which is good in this kind of declining market, but it certainly hasn’t been the great inflation trade that say energy or some, you know, nutrients like potash and stuff have been. So yeah, it sounds like we’re on the same page there, although my trade may be a little longer than yours. So it looks like you’ve got a comment.

Brooke: Yeah, yeah, yeah. So yeah, Keith, it’s interesting that you mentioned that about, you know, the elevators analogy as far as that goes and you know, with Sentiment. Seasonal is exactly that. Seasonal, you know, seasonal investing really is behavior investing. You want to be in before everybody else gets in or gets on the elevator. You want to be the first one in the elevator, you know, and everybody else gets on the elevator. You know, it goes up a few floors. Everybody else keeps going on and then you go, okay, time to get off. And you leave. So you’re really playing, seasonal investing is really playing investor behavior. That’s exactly what’s taking place. Like people know we’re not the only ones that know that there’s a seasonal element to gold and they try and play that, but they play it too late. So, you know, from a seasonal perspective, you wanna be in there before they’re there. And when they all, that whole narrative gets in there and they’re all jumping on that position then you say, okay, well now it’s time to get out. Now a seasonal basis, there’s that trend. And that’s really what it comes down to.

Keith: Excellent. I think we could probably end it here, Brooke. I think we’ve covered a lot. And you know, we did the nuts and bolts of it, which is, you know, what’s with the market. And I think we’re both on the same page that maybe there’s some tradeable rallies, but we’re not as the Wizard of Oz, Dorothy said, I don’t think we’re in Kansas anymore. I don’t think we’re in a bull market anymore. We may, you know, obviously we will return to a bull market eventually, but now’s not that time. So we both seem to agree on that. And it’s interesting to hear your comments on, you know, the bond market, the utilities and, interest sensitives that normally go over the summer and when you might want to consider them. That kind of thing. So thank you, Brooke, for coming on the show and thank you for offering your insights because they’re from a different, yet similar perspective of my own. And I think our, our watchers will really enjoy your comments.

Brooke: Well, great. Well thank you for having me on the show, Keith. It was a pleasure.

Keith: Thanks, Brooke.


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