Stocks Selloff. Now What?

Bloomberg is saying it’s because bond yields are rising. But bond yields have been rising for months, and I’ve been telling you as much, so that’s not the real reason for the recent weakness.

The 10-year, by the way, is now at 1.5%.

And the market is just taking a bit of a pause here, the selling mostly concentrated in over-owned tech names on the NASDAQ.

I still think the trend for stocks is higher with volatility still below that key 30 level, which I told premium members about last week. That’s something to watch.

Gold is still very soft, pulling all the way back to just above $1,700. Again, it’s those rising bond rates that are keeping a lid on gold. That's really the level that gold was at last June before it took off to record highs in August above $2,000 an ounce.

And if the support doesn't hold here for gold, it could fall another $25 to the high $1,600s for the next level of support, as I see it.

As such, I’m starting to see some new opportunities in gold.

I've nibbled a bit at Alamos Gold (NYSE: AGI)(TSX: AGI) this week down around US$7.00. And been keen to look at Newmont (NYSE: NEM)(TSX: NGT), though I haven't pulled the trigger yet, as it pulls down to the lower US$50s. But really until rates turn around, it's hard to call a bottom in this golden pause.

 

You’ve also got a new stimulus out soon and Fed Chair Jerome Powell will no doubt do his best to reassure markets today. The Fed is now starting to worry about those rising interest rates.

Now an infrastructure bill is likely on the way after the stimulus, which is something Gerardo and I have been telling would be the case. Relief and then stimulus and infrastructure.

That's going to continue to keep commodities buoyant. And that's what we continue to see, as copper went to 10-year highs and oil is now at a one year highs at over $60 a barrel.

I mentioned last week about buying Exxon (NYSE: XOM) and that's continued to inflate as they added an activist to the board.

It’s no coincidence that these names that I talk about continue to inflate. These are the sectors that are outperforming — commodities and energy — here as the money printing and response to the virus has led to inflation.

And I think that's still the hand to play here for the next, well, until it's not.

 

With this infrastructure bill on the way after stimulus, I think you continue to look at copper stocks and rare earth stocks, which China continues to rattle its saber on.

And we've been seeing increased news about how hard it is to secure the supply chain for batteries, whether that's the news that the Biden Administration halted the importation of batteries with Korean components

Or more recently ordering a review of the supply chain for defense and high-tech components that involve rare earths

Or the US Postal Service not being able to buy their new trucks as electric vehicles because of the still-high upfront cost.

And it's going to be commodities — copper, nickel, rare earths, lithium — that are necessary for this electric vehicle and battery revolution that's ahead.

We'll be continuing to talk more about that sector here at Daily Profit Cycle.

And, of course, recommending the names that we like in our premium letters to our paying subscribers.